If Charlie's utility function is X ⁵_AX_B, the price of apples is p_A, the price of bananas is p_B, and his income is m, then Charlie's demand for apples will be A)0.83m/p_A. B)m/2p_A. C)m/(p_A + p_B). D) 0./20p A m. E) 1.20pB m/pA.

Question

Quizplus · Accepted Answer

According to Charlie's utility function, the marginal utility of apples is given by S1U1P15S1S1P0S1U1B1A. The amount of apples Charlie purchases will be where the marginal utility of apples is equal to the price of apples (pS1U1B1AS1U1B0). Thus, we can set these two expressions equal to each other and solve for the quantity of apples, denoted as X:

S1U1P15S1S1P0S1U1B1A = pS1U1B1AS1U1B0
X = S1U1P15S1S1P0S1U1B1A/pS1U1B1AS1U1B0

Substituting the values given in the question, we get:

X = S1U1P15S1S1P0S1U1B1A/pS1U1B1AS1U1B0 = 0.83m/pS1U1B1AS1U1B0

Therefore, Charlie's demand for apples is 0.83m/pS1U1B1AS1U1B0.

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

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