Question #33077

a consumer utility function is u(x,y)=x1/4 y3/4.given that the consumer has $1000 to spend on the two goods with a price $4 and $3 for x and y respectively. how much should she consume to maximize utility?

Expert's answer

So, we have 2 equations:

4x + 3y = 1000

x1/4y3/4 = max

We can state, that x1/4y3/4 = max, when x = 1 and y = (1000 - 4x)/3 = 996/3 = 332

So, the consumer should buy 1 unit of the first good and 332 units of the second to maximize its utility.

4x + 3y = 1000

x1/4y3/4 = max

We can state, that x1/4y3/4 = max, when x = 1 and y = (1000 - 4x)/3 = 996/3 = 332

So, the consumer should buy 1 unit of the first good and 332 units of the second to maximize its utility.

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