Question

Jane has utility function � �, � = �E�W. The price of x is �., the price of y is �0, and Jane’s income is W. What is the expression of her consumption of x as a function of prices and income (her optimal consumption is determined by the tangency rule)?

Answer 1

Answer: The correct answer is: Qx(px,py,Y)= 4Y/9px.

Step-by-step explanation:

MUX/MUY = PX/PY

4y/5x = Px/Py

Py = Px * 5x/4y

Also budget line gives us x.Px + y.Py = Y

x = 4Y/9px.