In: Economics
The utility function is
Determine the Marginal utility of Gasoline by differentiating the utility function wrt G
Similarly calculate the Marginal utility of water by differentiating U wrt W, we get
At equilibrium the following relationship must hold true (Law of equimarginal criterion)
Plug in the values in the above expression
Given, Income =.$ 900
The budget constraint can be expressed as
Plug in the value of W in the above expression
Amount of Gasoline = 20
Amount of water = 11.11
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