Answer to Question #134032 in Macroeconomics for shadrick

Question

The utility function of an individual is given by U=X^(3/4) Y^(1/4). The price of good x is K6 per unit. The price of good y is K3 per unit. The individual/s income is K120.
(a).Using the Lagrangian method, find how much of each good the individual will consume to maximize utility. (8 MARKS)
(b).Plot the budget line and include an indifference curve on the same diagram to show the optimal combination obtained above. (4 MARKS)
(c).Mathematically prove that at the above optimal combination of goods, the slope of the budget line equals the slope of the indifference curve (4 MARKS)

Answer 1

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