Answer to Question #291065 in Economics of Enterprise for Miera Ali

Question

Suppose that the utility function for two

commodities is given by U = x² y³ and the budget constraint is 10x + 15y = 250. Find the values of x and y that maximize utility 

Answer 1

The consumption is maximized, when:

MUx/Px = MUy/Py and 10x + 15y = 250.

MUx = U'(x) and MUy = U'(y), so we need to know the prices Px and Py to find optimal consumption.