Question
Faisal has the following utility function: U = 100*X0.75*Y0.25 and a Marginal Rate of Substitution of: MRS = He faces prices of px = $5
Faisal has the following utility function: U = 100*X0.75*Y0.25 and a Marginal Rate of Substitution of: MRS = He faces prices of px = $5 and py = $10 and consumes five units of each good. Assume he is spending his entire budget.
A. Does Faisal's utility function meet all the criteria that are required for preferences?
B. Is Faisal maximizing his utility? Should he consume more of X or more of Y?
C. Assuming that he is spending his entire budget, what is his utility-maximizing bundle?
D. Show the analysis graphically.
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Management And Organisational Behaviour
Authors: Laurie Mullins
7th Edition
0273688766, 978-0273688761
