A Consumer's Utility Function Is Given By

question 58

Essay

A consumer's utility function is given by:
U(x,y)= 10xy
Currently,the prices of goods x and y are $3 and $5,respectively,and the consumer's income is $150.
a.Find the MRS for this consumer for any given bundle (x,y).
b.Find the optimal consumption bundle for this consumer.
c.Suppose the price of good x doubles.How much income is required so that the consumer is able to purchase the original consumption bundle (if you were unable to solve d. ,then take a guess at what the optimal bundle is before solving this)
d.Now that the price of good x has doubled,how much income is needed for the consumer to reach the original level of utility? Is this more or less that what you found in e.?

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Definitions:

Behaviour

encompasses the actions and reactions of an individual or group in response to external or internal stimuli.

Law of Effect

A principle in psychology proposed by Edward Thorndike that suggests behaviors followed by satisfying outcomes are likely to be repeated, while those followed by unpleasant outcomes are less likely to recur.

Environmental Response

The reaction or adaptation of an entity (individual, community, or organization) to changes in its environmental conditions.

Monitoring Behaviours

The process of observing and assessing individuals' actions or performance to ensure conformity with standards or expectations.