# Consider a utility function u(x1; x2) = x1^{1/2}x2^{1/2} . Let the prices of good 1 and good 2 be...

## Question:

Consider a utility function {eq}u(x_1; x_2) = x_1^{1/2}x_2^{1/2} {/eq} . Let the prices of good 1 and good 2 be p1 and p2, and of course consumer's income is m. Find the demand functions.

## Utility Maximization:

Utility maximization studies a consumer's problem with an income M, aiming to maximize her utility given the specific prices of two goods X and Y. Solving the problem can help answer the optimal bundle questions, derive the consumer's demand function for each good, and analyze the effect of income on consumption.

## Answer and Explanation: 1

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View this answerWe solve the utility-maximizing problem subject to budget constraint:

Maximize {eq}u(x_1; x_2) = x_1^{1/2}x_2^{1/2} {/eq} subject to {eq}p_1x_1 +...

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Chapter 3 / Lesson 2Learn about utility maximization. Discover various types of utility, examine utility maximizing rules, and study examples of maximizing utilities in economics.

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