Use the following to answer questions :
Table 5-1
-Refer to Table 5-1.If good X costs $6 per unit and good Y costs $5 per unit, at what quantities of X and Y is utility maximized if the budget is $33?
A)X = 2, Y = 3
B)X = 4, Y = 5
C)X = 3, Y = 4
D)X = 3, Y = 3
E)None of the above

Question

Use the following to answer questions :
Table 5-1 
-Refer to Table 5-1.If good X costs $6 per unit and good Y costs $5 per unit, at what quantities of X and Y is utility maximized if the budget is $33?
A)X = 2, Y = 3 
B)X = 4, Y = 5 
C)X = 3, Y = 4 
D)X = 3, Y = 3 
E)None of the above

Quizplus · Accepted Answer

The budget constraint is 6X + 5Y = 33. Solving for Y, we get Y = (33 - 6X)/5. Substituting this into the utility function, we get U = X^0.5 * (33 - 6X)/5)^0.5. Taking the derivative of U with respect to X and setting it equal to zero, we get X = 3. Substituting this back into the budget constraint, we get Y = 4.

Use the Following to Answer Questions