A student has a monthly budget of $800. She can spend her budget on two items, X and Y. Each unit of X costs $20 and each unit o
f Y costs $10. If the student has a utility function of U = 348X + 100Y + 6X2 + 4Y2 + 2XY, what is the optimal amount of X and Y for her to consume to have the maximum utility? What is this total utility? What is the value of lambda and what does this mean?
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Answer:
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Step-by-step explanation:
Total utility is the overall satisfaction that a particular consumer received from consuming a given overall quantity of a good or service, To calculate the value of total utility economists utilize the following basic total utility formula: TU = U1 + MU2 + MU3
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Let f(x) = y.
y = 4x - 12
Let x = 0
y = 4(0) - 12
y = - 12
This leads to the point (0, -12).
Let y = 0.
0 = 4x - 12
1 2 = 4x
12/4 = x
3 = x
This leads to the point (3, 0).
We now graph both points and then connect each point with a straight line.
