Question

Given the following Cobb-Douglas consumption function: 

𝑈 = 𝑋1 0.5 𝑋2 0.4;     𝑠𝑢𝑏𝑗𝑒𝑐𝑡 to: 2𝑋1 + 5𝑋2 = 250 i) Mathematically find the optimum values (the quantities which maximize the Utility function) of X1 and X2 ii) Find the marginal unities of X1 and X2 and interpret iii) Find the Lagrangian multiplier and interpret iv) Show the optimum consumption combination using graph 

Answer 1

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