Purchase Solution

Solving for Utility-Maximizing Bundle of Perfect Substitutes

Not what you're looking for?

Ask Custom Question

Jennifer's utility function is given by U = x + y, where x = food and y = clothing. If her income = $100, price of x = $10 and price of y= $5, find (graphically) her utility maximizing bundle of x and y. If her utility changes to U = 3x + y, how will her utility-maximizing bundle be affected?

Purchase this Solution
Solution Summary

This solution provides detailed explanation of how to solve for utility-maximizing bundle of goods that are perfect substitutes (linear utility function). The solution uses two versions of utility function and examines how the optimal solution changes from one case to the other.

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

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

Basics of Economics

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

Economic Issues and Concepts

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

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

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

View More Free Quizzes
Related BrainMass Solutions

  • Budget Constraint/Indifference Curve

    Diagram a representative budget constraint and indifference curve that passes through bundle A given Annette's budget is exhausted at bundle A. Is Annette maximizing utility? Why or why not?

  • Economics: Sunk Costs and Utility

    The second case involves the case of perfect complements where there is no degree of substitution available between any two goods and the third case is the case of perfect substitutes where the available goods have the capability of acting as substitutes

  • Calculating the Optimal Bundle of Consumption

    Prove that the utility maximizing bundle for Janet will be 14 packs of doughnuts and 6.5 packs of cookies For maximum utility MUC/Pc=MUD/Pd (2/3)*D^(1/3)*C^(-1/3)/20=(1/3)*D^(-2/3)*C^(2/3)/5 5*(2/3)*D^(1/3)*C^(-1/3)=20*(1/3)*D^(-2/3)*C^(2/3) D^(1

  • Utility Problems

    This is because a strictly increasing monotonic transformation will preserve the MRS of some underlying utility function. In the final case, the perfect substitutes example, we find a different MRS that doesn't depend on the quantity of good one.

  • Two Good Utility Maximization

    The utility function is given by u(x,y) = Min {2x + y, 2y} Income is 84 Suppose p_x = 3 and p_y = 2 How do I derive the optimal bundle/utility maximizing problem? See attached spreadsheet. Thank you asking BrainMass.

  • Maximizing Consumer Utility

    Given these prices and income, Bob maximizes utility buy consuming X1 and Y1.  On the same graph, indicate this utility maximizing bundle.  Suppose that the price of Y fall to $1/unit.  Illustrate how this changes Bob's budget constraint.  

  • Utility and Indirect Utility Mathematical Proof

    13051 Utility and Indirect Utility Mathematical Proof Consider the problems of maximizing u(x) subject to px = y and maximizing v(u(x)) subject to px = y, where v(u) is strictly increasing over the range of u.

  • Indifference Curves, Utility Maximizing Conditions, and Demand Curves

    Utility maximizing points correspond to tangency of the highest possible Indifference Curve with the Consumer's budget line. Consumer optimum is the same as Utility maximizing.

  • Indifference Curve, Budget Line & Optimal Utility

    Budget: 2x + 2y = 4 Solving for y: x + y = 2 y = 2 - x Utility function: U = xy Substituting: U = x(2 - x) U = 2x - x^2 7.

View More Related Solutions