If an individual's utility function is given by $U ( x , y ) = \sqrt { x y }$ and I = 100, p_x = 1,p_y = 4,his or her preferred consumption bundle will be: A)(20,20). B)(50,12.5). C)(40,15). D)(30,15).

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Quizplus · Accepted Answer

The utility function $U(x, y) = \sqrt{xy}$ is a Cobb-Douglas utility function. The consumer's budget constraint is $x + 4y = 100$. To maximize utility, the consumer should allocate their budget such that the marginal rate of substitution (MRS) equals the price ratio. Solving this gives the optimal bundle as (50, 12.5).

If an Individual's Utility Function Is Given By U(x,y)=xyU ( x , y ) = \sqrt { x y }U(x,y)=xy​

If an Individual's Utility Function Is Given By $U ( x , y ) = \sqrt { x y }$