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Maximizing Consumer Utility Under a Budget Constraint

Let M(U)a = z = 10 - x and M(U)b = z = 21 - 2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B.

Assume that the consumer has $10 to spend on A and B -- that is, x + y = 10.

How is the $10 best allocated between A and B?

How much utility will the marginal dollar yield?

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M927737

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