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Calculate Elmer's income

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Elmer's utility function is U(x, y) = min{x, y^2}. If the price of x is $20, the price of y is $20, and Elmer chooses to consume 8 units of y, what must Elmer's income be?

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Solution depicts the steps to determine the income level for Elmer in the example.

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An indifference curve is the instance where you are indifferent to options since the utility is constant, so we need to keep this in mind when we select a bundle on an indifference curve. We know that the utility function is min(x, y^2) and we know that y = 8 so U = min(x, 8^2) = min(x, ...

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Lokesh Jain, MSc
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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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