Question
Imagine you consume two goods, K and L, and your utility function is U = K 1/3 L 2/3 . Your budget is $120; P
Imagine you consume two goods, K and L, and your utility function is U = K1/3L2/3. Your budget is $120; PK = $6; PL = $9. So, the optimal bundle for you to consume is (K = 6.6667, L = 8.8889). Now, suppose the price of good K increases to $9. What is the new optimal K for you to consume?
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Public Finance A Contemporary Application of Theory to Policy
Authors: David N Hyman
11th edition
9781305474253, 1285173953, 1305474252, 978-1285173955
