Sally Consumes Two Goods, X and Y

question 134

Essay

Sally consumes two goods, X and Y. Her utility function is given by the expression The current market price for X is $10, while the market price for Y is $5. Sally's current income is $500.
a. Sketch a set of two indifference curves for Sally in her consumption of X and Y.
b. Write the expression for Sally's budget constraint. Graph the budget constraint and determine its slope.
c. Determine the X,Y combination which maximizes Sally's utility, given her budget constraint. Show her optimum point on a graph. (Partial units for the quantities are possible.) d. Calculate the impact on Sally's optimum market basket of an increase in the price of X to $15. What would happen to her utility as a result of the price increase?

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Definitions:

Night Terrors

Episodes of intense fear that occur during sleep, often involving screaming, thrashing, and a feeling of terror upon awakening.

Parasomnia

A category of sleep disorders that involve unwanted, disruptive motor or verbal activities during sleep, such as sleepwalking or night terrors.

Obstructive Sleep Apnea

A sleep disorder characterized by pauses in breathing or periods of shallow breathing during sleep, typically due to obstruction of the airway.

Hypothalamus

A region of the brain that plays a crucial role in many important functions, including releasing hormones and regulating body temperature.