Katie consumes X and Y in fixed proportions: a units of X and b units of Y. To find Katie's demand functions for X and Y, a. set ratio of marginal utilities equal to the ratio of prices and solve together with the budget constraint. cross out b. solve the following two equations: aX=bY and PxX+PyY=I cross out c. solve the following two equations: bX=aY and PxX+PyY=I cross out d. you only need the equation of the budget line cross out e. find the corner solution where Katie spends all her income on the good that gives the highest marginal utility per dollar
Katie consumes X and Y in fixed proportions: a units of X and b units of Y. To find Katie's demand functions for X and Y, a. set ratio of marginal utilities equal to the ratio of prices and solve together with the budget constraint. cross out b. solve the following two equations: aX=bY and PxX+PyY=I cross out c. solve the following two equations: bX=aY and PxX+PyY=I cross out d. you only need the equation of the budget line cross out e. find the corner solution where Katie spends all her income on the good that gives the highest marginal utility per dollar
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.2P
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Question
Katie consumes X and Y in fixed proportions: a units of X and b units of Y. To find Katie's demand functions for X and Y,
a.
set ratio of marginal utilities equal to the ratio of prices and solve together with the budget constraint.
cross out
b.
solve the following two equations: aX=bY and PxX+PyY=I
cross out
c.
solve the following two equations: bX=aY and PxX+PyY=I
cross out
d.
you only need the equation of the budget line
cross out
e.
find the corner solution where Katie spends all her income on the good that gives the highest
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