Juan has an income of $ 500 and consumes gasoline (G) for his car and tacos...

Juan has an income of $ 500 and consumes gasoline (G) for his car and tacos (T). The respective prices per liter of gasoline and tacos are (PG, PT) = (10,10). Its utility function is a Cobb Douglas function with alpha = beta = 1.

a. What is the Marshallian demand for both goods? (Algebraically)

G * =

T * =

b. What is the indirect utility? (Algebraically)
V (I, pg, Pt) =

c. Calculate the optimal amount Juan consumes of both goods and their level of utility.

G * =

T * =

U * =

d. If the price of gasoline doubles, find the optimal amount Juan now consumes of both goods and his new level of utility.

G * =

T * =

U * =

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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