Ambrose's brother Bartholomew has a utility function U(x₁, x₂)= 40x^1/2₁ + x₂, where x₁ is his consumption of nuts and x₂ is his consumption of berries.His income is $115, the price of nuts is $5, and the price of berries is $1.How many units of berries will Bartholomew demand? A)35 B)16 C)70 D)22 E)There is not enough information to determine the answer.

Question

Quizplus · Accepted Answer

Bartholomew will spend all his income on nuts and berries. The budget constraint is 5x₁ + x₂ = 115. To maximize utility, he will spend all his income on nuts first, as they provide more utility per dollar. He buys 23 nuts (115/5), leaving no money for berries, so he demands 35 berries (115 - 5*16).

Ambrose's Brother Bartholomew Has a Utility Function U(x1, X2)= 40x1/21

Ambrose's Brother Bartholomew Has a Utility Function U(x₁, X₂)= 40x^1/2₁