If George spends $5 (total) a week on good X and good Y, and if the price of each good is $1 per unit, then how many units of each good does he purchase to maximize utility?
To maximize the utility, George has to spend all his money buying one type of good. Either he buys 5 units of good X or 5 units of good Y.
Question (answer this question by using the information provided above)
Given the number of units of each good George purchased in the above summary, what is his total utility?
We can solve the question by graphing:
<br>Please refer to the attached diagrams.
<br>The first one is a usual convex indifference curve, which is tangent to the budget line at point A.
<br>However, this ...
Determine total utility