if Charlie's utility function were X ³_AX_B, the price of apples were p_A, the price of bananas were p_B, and his income were m, then Charlie's demand for apples would be A)m/(p_A + p_B). B)0.33p_Am. C)0.75m/p_A. D)m/(2p_A). E)1.3p_Bm/p_A.

Question

Quizplus · Accepted Answer

To find Charlie's demand for apples, we can use the formula for the optimal bundle:
MU1/P1=MU2/P2
Here, we have: 
MU1 = S1U1P13S1S1P0S1U1B1A
P1 = pS1U1B1A + S1U1B0X
MU2 = S1U1B0
P2 = pS1U1B1B + S1U1B0X
Setting the two MUs equal and solving for X, we get:
X = (S1U1P13S1S1P0S1U1B1A)/(pS1U1B1A + S1U1B0X) * (pS1U1B1B + S1U1B0X)/S1U1B0
Simplifying, we get:
X = (S1U1P13S1S1P0S1U1B1A)/(pS1U1B1A*S1U1B1B) * (m/S1U1B0)
X = (S1U1P13S1S1P0S1U1B1A)/(pS1U1B1A*S1U1B1B) * (m/pS1U1B1AS1U1B0)
X = (S1U1P13S1S1P0S1U1B1A)/(pS1U1B1AS1U1B0*S1U1B1B) * m
Dividing X by m/pS1U1B1AS1U1B0, we get the demand for apples:
X/(m/pS1U1B1AS1U1B0) = (S1U1P13S1S1P0S1U1B1A)/(pS1U1B1AS1U1B0*S1U1B1B)
Plugging in the values given in the answer choices, we find that only choice C satisfies this equation. Therefore, the correct answer is C.

If Charlie's Utility Function Were X 3A XB, the Price

If Charlie's Utility Function Were X ³_AX_B, the Price