Asked by Ashley Friend on Jun 11, 2024
Verified
If Charlie's utility function is X 5A XB, the price of apples is pA, the price of bananas is pB, and his income is m, then Charlie's demand for apples will be
A) 0.83m/pA.
B) m/2pA.
C) m/(pA pB) .
D) 0./20pAm.
E) 1.20pB m/pA.
Utility Function
A mathematical representation in economics that captures the level of satisfaction or happiness that consumers derive from consuming goods and services.
Price
The sum of money envisaged, obligatory, or handed over as compensation for something.
Income
The money received by a person or organization for work, investments, or from other sources.
- Compute the ideal decision for consumers given their budgetary constraints and the prices of goods.
Verified Answer
MA
Monique AbdallaJun 15, 2024
Final Answer :
A
Explanation :
According to Charlie's utility function, the marginal utility of apples is given by 5A. The amount of apples Charlie purchases will be where the marginal utility of apples is equal to the price of apples (pA). Thus, we can set these two expressions equal to each other and solve for the quantity of apples, denoted as X:
5A = pA
X = 5A/pA
Substituting the values given in the question, we get:
X = 5A/pA = 0.83m/pA
Therefore, Charlie's demand for apples is 0.83m/pA.
5A = pA
X = 5A/pA
Substituting the values given in the question, we get:
X = 5A/pA = 0.83m/pA
Therefore, Charlie's demand for apples is 0.83m/pA.
Learning Objectives
- Compute the ideal decision for consumers given their budgetary constraints and the prices of goods.