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Questions › JNU › JNU SIS 2017 › Q41
2 marks, −1Microeconomics › Budget constraint and consumer equilibrium › Demand under complements, substitutes and quasilinear utilityModerateabout 2 min

JNU SIS 2017 Question 41: Budget constraint and consumer equilibrium

Let the utility function be given by u(x, y)=ln⁡x+yu(x,\ y) = \ln x + yu(x, y)=lnx+y, where xxx and yyy are two goods. Let prices of two goods be given as px=2p_x = 2px​=2 and py=1p_y = 1py​=1. Calculate the utility maximizing choice of xxx and yyy for (i)(i)(i) income =10= 10=10 and (ii)(ii)(ii) income =20= 20=20.

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Let the utility function be given by u(x, y) = ln x + y, where x and y are two goods. Let prices of two goods be given as pₓ = 2 and p_y = 1. Calculate the utility maximizing choice of x and y for (i) income = 10 and (ii) income = 20. (A) (i) x = 5, y = 5; (ii) x = 10, y = 10 (B) (i) x = 3, y = 7; (ii) x = 6, y = 14 (C) (i) x = 1/2, y = 9; (ii) x = 1/2, y = 19 (D) None of the above

Also written as: Let the utility function be given by u(x, y) = ln x + y, where x and y are two goods. Let prices of two goods be given as p_x = 2 and p_y = 1. Calculate the utility maximizing choice of x and y for (i) income = 10 and (ii) income = 20.

Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.

What this question tests

This question is on Demand under complements, substitutes and quasilinear utility, part of Budget constraint and consumer equilibrium in Microeconomics.

Deriving demand when preferences are L-shaped, linear or quasilinear, and what that implies for income and price responses.

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