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5 You have to nd the utility maximizing consumption bundle in the following problem. Utility function of an agent is u : R 2 +

5 You have to nd the utility maximizing consumption bundle in the following problem. Utility function of an agent is u : R 2 + R, with u(x, y) = x y . The per unit prices of goods x and y are px and py dollars, respectively. The agent can spend at most M dollars on purchasing a consumption bundle. > 0, > 0, px > 0, py > 0, M > 0 [1] What are the "choice variables" and what are the "parameters" in this problem? What is the dierence between them? [2] How do we know this problem has a solution

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