If utility is given by $U ( x , y ) = x ^ { 2 } + y ^ { 2 }$ and p_x = 2,p_y = 3,I = 50,this person will choose A)(10,10). B)(15,6.67). C)(25,0). D)(0,50/3).

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Quizplus · Accepted Answer

The consumer maximizes utility subject to the budget constraint $2x + 3y = 50$. The utility function $U(x, y) = x^2 + y^2$ suggests that the consumer will spend all income on the good that provides the highest utility per unit cost. Here, $x$ provides more utility per unit cost than $y$, so the consumer will choose $x = 25$ and $y = 0$.

If Utility Is Given By U(x,y)=x2+y2U ( x , y ) = x ^ { 2 } + y ^ { 2 }U(x,y)=x2+y2

If Utility Is Given By $U ( x , y ) = x ^ { 2 } + y ^ { 2 }$