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Ann consumes two goods X and Y, his utility function is U(X, Y ) = 2XY 2. Suppose the price of X is $10, while the price of Y is $15. Ann's income is $500.

(a) Write the expression for indifference curve when Ann gets utility level 40. And along the indifference curve you found, calculate out the numbers of consumption of X when Y=4.

(b) Write the expression for Ann's budget constraint, graph the budget constraint and determine its slope.

(c) Determine the X, Y combination which maximizes Ann's utility, given her budget constraint. And figure out what's marginal rate of substitution (MRS) between two goods at that maximization point.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M91584492

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