Answer to Question #202952 in Microeconomics for Arhin Kingsley

Question

David's utility function for good X and Y is given by U(x,y)=x^2×y^3, wher Px, Py and I are the price of good X, price of good Y and the consumer income respectively.

Write the budget constraint of the consumer.

Answer 1

Solution:

U(x,y) = X²Y³

The budget constraint is as follows:

I = PxX + PyY

Where: I = Income

           Px = Price of good X

           Py = Price of good Y

Assuming the values of the above are as follows:

I = 100

Px = 4

Py = 5

Then the budget constraint will be as follows:

100 = 4X + 5Y