Purchase Solution

# Finding the optimal consumption bundle

Not what you're looking for?

Two consumers, Mamoon and Kader, consume only two goods, good 1 and good 2, with the quantities of each consumed denoted by x1 and x2 respectively. The price of x1 is \$6/unit, and the price of x2 is \$5/unit. The consumer has a fixed income of \$64.

Mamoon has a utility function: U(x1,x2 )=2x1^3 x2^5?
Kader's utility function is: U(x1,x2 )=x1+2x2

a. Solve Kader's utility maximization problem.
b. Show the on a diagram with the horizontal axis represents x1and the vertical axis represents x2 the way to find the optimal consumption bundle of Kader graphically, label the optimal bundle.

##### Solution Summary

The solution describes the steps to solve the given utilization problem.

##### Solution Preview

Please refer attached file for graph.

a. Solve Kader's utility maximization problem.
U(x1,x2)=x1+2x2
Marginal utility of x1 can be found by differentiating with respect to x1.
MU(x1)=dU(x1,x2)/dx1=1

Marginal utility of x2 can be found by differentiating with respect to x2.
MU(x2)=dU(x1,x2)/dx2=2

Marginal Utility of x1 per dollar spent=MU(x1)/Px=1/6=0.167
Marginal Utility of x2 per dollar ...

Solution provided by:
###### Education
• BEng (Hons) , Birla Institute of Technology and Science, India
• MSc (Hons) , Birla Institute of Technology and Science, India
###### Recent Feedback
• "Thank you"
• "Really great step by step solution"
• "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
• "Thanks Again! This is totally a great service!"
• "Thank you so much for your help!"

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.