What is her net demand of apples and oranges respectively

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Reference no: EM131169300

Alice, living in Columbus, consumes apples and oranges and nothing else. Let us denote Apples by A and Oranges by O. Let PA denote the price of apples and PO denote the price of Oranges. Alice’s is born with 60 Apples and 30 Oranges. PA = 5 and PO = 10. Alice has a very particular way to rank various bundles of apples and oranges. Particularly she uses the following utility function U(xA, xO) = x6 Ax3 O. MRS = 2xO xA . Plot Apples on x-axis and Oranges on y-axis.

1. Alice buys x∗ A of apples and x∗ O of oranges. Find x∗ A and x∗ O. Clearly show how you get the answer.

2. What is her net demand of Apples and Oranges respectively.

Reference no: EM131169300

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