One reasonable consumer is choosing to maximize U(X,Y)=XY under a budget constraint of PxX+PyY=M. (Px,Py,M)=(4,2,24). (1)...

One reasonable consumer is choosing to maximize U(X,Y)=XY under a budget constraint of PxX+PyY=M.

(Px,Py,M)=(4,2,24).

(1) Explain what Px/Py=2 means.

(2) Draw a budget line.

(3) Draw an indiscriminate curve that conforms to a given utility function.

(4) Find the optimal consumption (X*,Y*).

(5) Calculate the income elasticity of demand for product X.

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Rahul Sunny answered 2 years ago

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