Asked by Spencer Baker on Apr 25, 2024

Diana consumes commodities x and y and her utility function is U(x, y)  xy2.Good x costs $2 per unit and good y costs $1 per unit.If she is endowed with 3 units of x and 6 units of y, how many units of good y will she consume?

A) 11
B) 3
C) 8
D) 14
E) None of the above.

Utility Function

A representation of how different combinations of goods or services produce levels of happiness or satisfaction for an individual or entity.

Commodities

Fundamental products utilized in trade that can be substituted with similar types of goods, commonly employed as components in manufacturing other products or services.

  • Master the concept of utility maximization and its effect on consumption and labor decision-making.