Finding optimal utility level
Evaluate utility over video games and burritos.
Utility function (u)=v^.5b^.5
Income of $20,000 price of video games=$50, price of burritos=$2
Budget constraint is m=b(Pb)+v(Pv)
m=income, Pb=price of burritos, Pv=price of video games
A. Find optimal consumption level of video games and burritos that maximizes total utility.
B.What is utility level?
C What is optimal consumption basket?