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Questions › JNU › JNU SSS 2010 › Q23
1 mark, −0.5Microeconomics › Budget constraint and consumer equilibrium › Corner solutionsModerateabout 2 min

JNU SSS 2010 Question 23: Budget constraint and consumer equilibrium

In a two-good world, a consumer's utility function is given by the following : U(x, y)=max⁡{x, y}U(x,\ y) = \max\{x,\ y\}U(x, y)=max{x, y}, where xxx and yyy are the amounts consumed of the first and second good respectively. The price of both goods are Rs 2 per unit. The consumer's income is Rs 100. His optimal consumption bundle is

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In a two-good world, a consumer's utility function is given by the following: U(x, y) = max {x, y}, where x and y are the amounts consumed of the first and second good respectively. The price of both goods are Rs 2 per unit. The consumer's income is Rs 100. His optimal consumption bundle is (A) either (i) zero unit of x and 50 units of y or (ii) 50 units of x and zero unit of y (B) 50 units of x and 50 units of y (C) 25 units of x and 25 units of y (D) None of the above

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

What this question tests

This question is on Corner solutions, part of Budget constraint and consumer equilibrium in Microeconomics.

Optima at the edge of the budget set, where the consumer spends nothing on one good.

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Practise Budget constraint and consumer equilibriumMore on Corner solutions

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Question from the JNU SSS 2010 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.