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Francisca has a budget of 2,400 Chilean Pesos to spend on avocados (A) and beef (B). The price of avocados is 100 Pesos per
Francisca has a budget of 2,400 Chilean Pesos to spend on avocados (A) and beef (B). The price of avocados is 100 Pesos per avocado and the price of beef is 400 Pesos per kg of beef. a) Say that Francisca's preferences for both goods are given by the following utility function: U(A, B) = 4A0.5B0.25. How much should she choose to consume of each? [Note: Solve this problem using the Lagrangian method] b) Now let's say that Francisca's preferences for both goods are given by the following different utility functions: U (A, B) = 0.5ln(A) 0.25ln(B). How much should she choose to consume of each in this case?
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Microeconomics
Authors: Robert Pindyck, Daniel Rubinfeld
8th edition
978-0132870436, 132870436, 013285712X, 978-0133371178, 133371174, 978-0132857123
