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Question: 1. A consumer has the utility function U = 20X0.5Y 0.4 and buys good X at £10 a unit and good Y at £2 a unit . If their budget constraint is £450, what combination of X and Y will maximize utility? Check that second-order conditions are satisfied by using the bordered Hessian.

2. A consumer has the utility function U = 4X0.75Y 0.25 and can buy good X at £12 a unit and good Y at £2 a unit. Find the combination of X and Y that they should purchase to minimize the cost of achieving a utility level of 580 and check that second-order conditions are met using the bordered Hessian matrix.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M92291330

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