George has preferences over two goods (G1and G2) that can be represented by the utility function...

George has preferences over two goods (G₁and G₂) that can be represented by the utility function U(G₁, G₂) = ???{ 10G₁,2G₂}. Assume that both goods can only be purchased in integer (whole number) amount! First, if George has $120 to spend and the first good costs $20 per unit, while the second good costs $4 per unit, how many units of both goods will George purchase when he is maximizing his utility subject to his budget? Second, calculate his utility at the optimum. Finally, holding all else constant, if George is given $10 extra in budget (so that he has $130 total), how much does his utility increase by?

Expert Solution

Rahul Sunny answered 1 year ago

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