Assume your utility function for shoes (x) and hats (y) is given by U(x,y)=x3y5. a) What...

Assume your utility function for shoes (x) and hats (y) is given by U(x,y)=x3y5.

a) What type of utility function is this? What is the MRS?

b) Let Px = 10, Py = 25, and M = 160. Solve for the optimal consumption of shoes and hats.

c) Suppose there is a sale on hats and the price of hats decreases to Py = 20. Solve for your new optimal bundle of shoes and hats.

Expert Solution

Rahul Sunny answered 2 years ago

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