Kenny G spends all his income on two musical instruments: xylophones (x) and yotars (y). Kenny's...

Kenny G spends all his income on two musical instruments: xylophones (x) and yotars (y). Kenny's utility function is U(x,y)=x^0.2y^0.8 and his income is $50. Assume that xylophones cost $10 and yotars cost $10 per unit.

Kenny has a general preference for ________. Since the instruments have the same price, we assume his optimal bundle will contain more_________ . Indeed, his optimal bundle includes________ xylophone(s) and _______ yotars. The utility he obtains from this bundle is equal to ________, which is higher than the utility he obtains from any other bundle he can afford, e.g. the bundle (2, 3) which gives him a utility of _______.

Solutions

Expert Solution

a) yotars

b) yotars

c)1

d) 4

e)3.03

f) 2.736

Rahul Sunny answered 2 years ago

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