Question
Naliaka has the following utility function for her mrenda (X) and likhubi (Y) consumption U = 4X/3 Y2/3 Supposing that the bunch prices of
Naliaka has the following utility function for her mrenda (X) and likhubi (Y) consumption U = 4X/3 Y2/3 Supposing that the bunch prices of mrenda and likhubi are Ksh 20 and Ksh. 40 respectively, and that she has a total of Ksh. 500 to spend on the two inputs: i. Set up the constrained utility maximization problem for Naliaka ii. By applying the First Order Condition, find the critical values of X, X and Y iii. Using Second Order Condition, confirm that the critical values present maximum utility What will be the stationery value of U (15 marks) iv.
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Microeconomics
Authors: David Besanko, Ronald Braeutigam
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1118572270, 978-1118799062, 1118799062, 978-1118572276
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