Answer to Question #289923 in Microeconomics for Khurlep

Question

given that a firm has a utility function U=X^0.5Y^0.5, determine the demand function for commodities X and Y

Answer 1

A consumer's budget—the amount of money available to spend on a product or service—is combined with the utility function to determine the demand function. So, we need to know the prices of commodities X and Y and consumer’s budget to derive the demand function.