if Charlie's utility function were X ⁵_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)0.83m/p_A. B)m/(2p_A). C)0.20p_Am. D)m/(p_A + p_B). E)1.20p_Bm/p_A.

Question

Quizplus · Accepted Answer

The correct answer is A because the demand for apples is equal to the marginal utility of apples divided by the price of apples. The marginal utility of apples is equal to 5X_A⁴X_B, and the price of apples is p_A. Therefore, the demand for apples is equal to 5X_A⁴X_B/p_A. Substituting X_A = 0.83m/p_A, we get the demand for apples is equal to 0.83m/p_A.

If Charlie's Utility Function Were X 5A XB, the Price

If Charlie's Utility Function Were X ⁵_AX_B, the Price