Asked by Riley Lennon on Jun 26, 2024

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recall that Casper's utility function is 3x  y, where x is his consumption of cocoa and y is his consumption of cheese.If the total cost of x units of cocoa is x2, the price of cheese is $2, and Casper's income is $39, how many units of cocoa will he consume?

A) 5
B) 0
C) 2
D) 3
E) 6

Utility Function

A formula or mapping that indicates the level of happiness or preference an individual assigns to various bundles of goods or services, used in decision-making analysis.

Cocoa

A powder made from roasted and ground cacao seeds, used in the making of chocolate, as well as in baking and cooking.

  • Understand the relationship between consumer demand and the factors of income and prices.
  • Analyze utility functions to establish the ideal consumption levels.
  • Evaluate the demand function for a range of goods through the lens of utility maximization.
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KF
Keith FitzpatrickJul 01, 2024
Final Answer :
D
Explanation :
We need to maximize Casper's utility function subject to his budget constraint.
His budget constraint is: x2 + 2y = 39
We can rearrange it as: y = (39 - x2)/2
Substituting y in the utility function, we get:
U(x) = 3x  (39 - x2)/2
To maximize U(x), we need to find the value of x that maximizes the above function.
Differentiating U(x) with respect to x and setting it equal to zero, we get:
3  (39 - 2x2)/2 = 0
Simplifying, we get:
39 - 2x2 = 0
x2 = 19.5
x = 3
Therefore, Casper will consume 3 units of cocoa.