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1. Consider the following utility maximization problem; 1 max_U(x, y) == ln(1+x)+ln(1+y) subject to 2x+3y=13 2 a. What is the utility maximizing level of
1. Consider the following utility maximization problem; 1 max_U(x, y) == ln(1+x)+ln(1+y) subject to 2x+3y=13 2 a. What is the utility maximizing level of x and y? b. Check whether the second-order conditions are satisfied. What is the maximum utility? c. Suppose that the price of commodity x rises from 2 to 2.25 (i.e. dP = 0.25) How do the optiumum values of commodity x and commodity y change? Comment on your result.
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To solve the utility maximization problem we can use the Lagrange multiplier method The Lagrangian f...
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
