Practical problems in price theory
Course:- Microeconomics
Reference No.:- EM1372

Assignment Help
Assignment Help >> Microeconomics

Problem: Warming Up!

Luke likes to consumer CDs (good1) and pizzas (good 2). His preference over both goods is given by the utility functio

U(x1; x2) = x21 x42.

If Luke allocates $200 to spend on both goods and if a case of CDs costs $20 and a pizza costs $10, how many cases of CDs and pizzas would he consume in order to maximize his utility subject to his income. Show your work and illustrate your answer graphically.


The problem in economics in price theory deals with deriving maximum marginal utility and marginal rate of substitution.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Microeconomics) Materials
Suppose that A = 50 and β = 4. Find the optimal capacity, peak price, and off-peak price. (b) Suppose that A = 90 and β = 8. Find the optimal capacity, peak price, and o
If the position of the demand curve for digital rock music albums unchanged, what can account for a continuing rise in the market clearing price? explains why album prices hav
Suppose there are four large manufacturers of toilet tissue. The largest of these manufacturers announces that it will raise its prices by 15 percent due to higher paper cos
Minimum wage legislation requires most firms to pay workers no less than the legislated minimum wage per hour. Using marginal productivity theory, explain how a change in mi
First, choose one (1) of the essays from the "Issues Facing the International Community" listed in the "Supplemental Readings" section of the course lessons. Then, let the rea
Suppose instead that the payoffs of advertising game between two companies are (20,20), (28,5), (5,28), and (12,12) when the strategy combinations are (C, C), (N, C), (C, N) a
Take time to "browse around" the following website which has become a resource area for various aspects of Dante's famousInferno from hisDivine Comedy: http://www.worldofdante
Suppose a tax per unit output (per-unit tax) is imposed on the production of Q with the intent of making equal the market level of output and the socially efficient level. H