Given utility function U= where PX = 12 Birr, Birr, PY = 4 Birr and the income of the consumer is, M= 240 Birr (4 points).
Find the utility maximizing combinations of X and Y.
Calculate marginal rate of substitution of X for Y (MRSX, Y) at equilibrium and interpret your result.
Suppose a particular consumer has 8 birr to be spent on two goods, A and B. The unit price of good A is 2 birr and the unit price of B is 1 birr. The marginal utility (MU) she gets from Consumption of the goods is given below (4 points).
Quantity
1
36
30
2
24
22
3
20
16
4
18
12
5
16
10
6
10
4
A) Based on the cardinal analysis, what is the combination of the two goods that gives maximum utility to the consumer?
B) What is the total utility at the utility maximization level?