An Individual Consumes Products X and Y and Spends $25

question 24

Essay

An individual consumes products X and Y and spends $25 per time period. The prices of the two goods are $3 per unit for X and $2 per unit for Y. The consumer in this case has a utility function expressed as:
U(X,Y) = .5XY MU_X = .5Y MU_Y = .5X.
a. Express the budget equation mathematically.
b. Determine the values of X and Y that will maximize utility in the consumption of X and Y.
c. Determine the total utility that will be generated per unit of time for this individual.

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Definitions:

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