What would have to be his-her budget constraint to maximize

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Reference no: EM13192000

Assume that an individual consumes two goods, X and Y. The total utility (assumed measurable) of each good is independent of the rate of consumption of other good.

The price of X and Y are respectively $40 and $60. Use the following table of total utilities to answer the following questions.

units of goods total utility ofX total utility of Y
1 20 45
2 38 78
3 54 108
4 68 135
5 80 159
6 90 180

a. If the consumer has $420 to spend, ______ unit of X and _______ units of Y maximize utility subject to the budget constraint. Explain.

b. If the consumer has $220 to spend, _______ units of X and _______ units of Y maximize utility subject to the budget constraint. Explain.

c. If the consumer wanted 4 units of X and 6 units of Y what would have to be his/her budget constraint in order to maximize his/her utility?

Reference no: EM13192000

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