Howard has the utility function U(x, y)= x - (1/y).His income is $30.
A)Howard does not like good y.
B)Howard has a bliss point.
C)If the price of good x is $4 and the price of good y is $1, Howard will buy 2 units of y.
D)Howard will buy good y only if it is cheaper than good x.
E)None of the above.

Question

Quizplus · Accepted Answer

To maximize utility with a budget of $30 and prices of $4 for good x and $1 for good y, Howard will spend $8 on good x (2 units) and $22 on good y (22 units). This allocation gives him the highest utility given the prices and budget, and he is willing to buy both goods at these prices. Therefore, options A, B, D, and E are incorrect.

Howard Has the Utility Function U(x, Y)= X - (1/y)