Elmer's utility function is U(x, y)= min{x, y²}.If the price of x is $25, the price of y is $10, and Elmer chooses to consume 5 units of y, what must Elmer's income be? A)$1,350 B)$175 C)$775 D)$675 E)There is not enough information to tell.

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Quizplus · Accepted Answer

Elmer's utility function is U(x, y) = min{x, y^2}. To maximize utility, Elmer will set x = y^2. If Elmer consumes 5 units of y, then x = 5^2 = 25. The cost of 25 units of x is 25 * $25 = $625, and the cost of 5 units of y is 5 * $10 = $50. Therefore, Elmer's income must be $625 + $50 = $675.

Elmer's Utility Function Is U(x, Y)= Min{x, Y2}

Elmer's Utility Function Is U(x, Y)= Min{x, Y²}