Ambrose's utility function is = 4x^1/2₁ + x₂.If the price of nuts (good 1)is $1, the price of berries (good 2)is $5, and his income is $190, how many units of berries will Ambrose choose? A)36 B)101 C)18 D)17 E)21

Question

Quizplus · Accepted Answer

Ambrose will maximize his utility by spending his income such that the marginal utility per dollar spent on each good is equal. Solving the budget constraint and utility maximization conditions, Ambrose will choose 18 units of berries.

Ambrose's Utility Function Is = 4x1/21 + X2

Ambrose's Utility Function Is = 4x^1/2₁ + X₂