Suppose a consumer's utility function is given by U(X,Y) = X^ 2 \times Y. The Price of Y is P Y =...
Question:
Suppose a consumer's utility function is given by {eq}U(X,Y) = X^ 2 \times Y. {/eq} The Price of {eq}Y {/eq} is {eq}P_ Y = 3 {/eq}, and the consumer has {eq}M = $18 {/eq} to spend. Draw the Price Consumption Curve for the following values of {eq}P_x: P_x=1, P_x =2, P_x=3 {/eq}.
Budget line:
Consider a consumer who likes to consume two goods produced in the economy by the producers in the market. Given the prices of these two goods and the consumer's income, all the possible combinations of two goods that satisfies the consumer's income is defined as the budget line.
Answer and Explanation: 1
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View this answerThe consumer's utility function is: {eq}U\left( {X,Y} \right) = {X^2}Y{/eq}
First find out the marginal rate of substitution between goods X and Y:
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Consumer Preferences & Choice in Economics
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Learn about consumer preferences in economics and understand the importance of the consumer choice theory - study examples of consumer preference assumptions.
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