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Jessica derives utility from her consumption of two goods, video game plays on an X-Box (call...

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Economics

Jessica derives utility from her consumption of two goods, videogame plays on an X-Box (call it good X) and high energy yogurt(call it good Y). Her utility function is U(X,Y) = XY. The priceper play of games is $2.00 and the price of yogurt is $10 percontainer and Jessica's income is $50 per week. She is presentlyconsuming a bundle of game plays and yogurt such that her marginalrate of substitution is 1 (or -1, if you wish). Use thisinformation to answer the following questions.

(4)a. Is Jessica currently consuming the bundle of game playsand yogurts such that her utility is maximized? Explain.

(4)b. If she isn’t choosing her utility maximizing bundle, whatadjustment should she make to her consumption bundle?

Answer & Explanation Solved by verified expert
4.4 Ratings (861 Votes)
A For consumer equilibrium the following condition has to be satisfied MRS PxPy Formula for MRS MUxMUy Here MRS is 1 Given Price ratio 210 15 Hence here MRS Price Ratio    See Answer
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