Calculate the utility maximizing quantities ofx1 and x2

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Reference no: EM13244884

Suppose that income is M, and prices are P1 and P2, and considerthe following utility function:

U(x1,x2)=U(X1X2)=X10.4X20.6

a. Find the slope of thisindifference curve.

b. Using Lagrangian function, derive the ordinary demandfunctions of X1 and X2.

c. Suppose M=$100, and prices are P1= $20 andP2= $20; calculate the utility maximizing quantities ofX1 and X2. If price of good 1 drops to $10,what would be the demand for X1. Using this information,draw a demand curve of X1.

Reference no: EM13244884

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