Question

1.      Sally consumes two goods X and Y, her utility function is given by the equation

U= 60XY².Thecurrent market price for X is 200 birr, while the market price for y is 100birr and her current Income is 10,000birr

A.     Sketch a set of two Indifferent curves for Sally in her consumption of X and Y 

B.     Write the expression for Sally's budget constraint graph the budget constraint and find the slope

C.     Determine the X, Y combination that maximize her utility given her budget constraint

Calculate the Impact on Sally's  optimum consumption of X and Y If the price of X increase to 300birr.

Answer 1

$$200x+100y=10,000$$

$$100y=-200x+10,000$$

$$y=-2x+100$$

$$k=-2$$

$$MU_x=60y^2$$

$$MU_y=120xy$$

$$x=17$$

$$y=68$$

If Px=300

$$x=11$$

$$y=66$$