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Determine the optimal consumption level of goods

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Suppose a consumer has a budget of $12 and wishes to buy two goods, Food (F) and Clothing (C). The price for Food is equal to $2 per unit and the price for Clothing is $1 per unit. Find the consumer's optimal consumption basket when he has the following utility function: U(F, C) = F^2C.

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Solution depicts the steps to estimate the optimal consumption basket in the given case.

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In this case, the utility function is given by

The marginal utility of Food (F) can be found by differentiating the utility function with respect to F. Similarly, ...

Solution provided by:
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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