Charlie Consumes Apples and Bananas $\mathbf{U}\left(X_{A}, X_{B}\right)=x_{A} x^{2} B$

question 13

Multiple Choice

Charlie consumes apples and bananas. His utility function is $\mathbf{U}\left(X_{A}, X_{B}\right) =x_{A} x^{2} B$
-refer to scenario above ,Charlie's utility function is x_Ax_B.The price of apples used to be $1 per unit, and the price of bananas $2 per unit.His income was $40 per day.If the price of apples increased to $1.50 and the price of bananas fell to $.75, then in order to be able to just afford his old bundle, Charlie would have to have a daily income of

• A)$56.25.
• B)$37.50.
• C)$76.
• D)$18.75.
• E)$150.

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Definitions:

Accounting Profit

The total revenue of a business minus its explicit costs, reflecting the financial gain as recorded in the financial statements.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, perfect information, and free entry and exit.

Elastic

A term used to describe a good's demand sensitivity to changes in price; highly elastic means demand changes significantly with price changes.

Industry Output

The total production of goods and services produced by an industry within a specific period.