Consider the following problemuab a2 b the price of good, Ask an Expert

Economics

Consider the following problem.

U(a,b) = a^2 + b. The price of good a is Pa=1 and the price of good b is Pb=1. The person has income of 100 to spend on a and b.

(Note: when fixing b here, this utility function exhibits increasing marginal utility on good a.)

Question: What is the optimal consumption bundle (a*,b*)? What can you say about this utility function?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91272799

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