Utility function-find the equilibrium quantities

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Reference no: EM13887107

Consider the utility function U(x, y) = x3y2 with the price of X equal to 3 and the price of Y equal to 4. Income devoted to the purchase of x and y is $36.

1) Find the equilibrium quantities of X and Y. (Use the LaGrange Method)

2) Using the budget constraint and utility function graph what this looks like.

3) What happens to equilibrium quantities of X and Y if income increases to $144. (Use the LaGrange Method)

4) What happens to equilibrium quantities of X and Y if the price of X increases to $12 and income remains at $144?

5) Does MRS = Price Ratio?

Reference no: EM13887107

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