Answer to Question #58505 in Microeconomics for ammar
(a) Usman should spend his income in such way, that MUx/Px = MUy/Py and Px*Qx + Py*Qy = I, if he want to maximize his total utility. So, we have a system of 2 equations: MUx/1 = MUy/1 and 1*Qx + 1*Qy = 8, so MUx = MUy and Qx + Qy = 8.
(b) The total amount of utility received by Usman at his optimal point will be the sum of total utilities, that correspond to the marginal utilities from the previous question.
(c) The equilibrium condition for the consumer is MUx/Px = MUy/Py and Px*Qx + Py*Qy = I.
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!