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Questions › UoH › UoH 2012 › Q8
1 mark, −0.33Microeconomics › Budget constraint and consumer equilibrium › Utility maximisation and the interior optimumEasyabout 1 min

UoH 2012 Question 8: Budget constraint and consumer equilibrium

For a Cobb-Douglas Utility function U(X1,X2)=X1X2U(X_1, X_2) = X_1 X_2U(X1​,X2​)=X1​X2​, for given income level and prices of X1X_1X1​ and X2X_2X2​ which of the following is true?

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Plain-text version

For a Cobb-Douglas Utility function U(X₁, X₂) = X₁ X₂, for given income level and prices of X₁ and X₂ which of the following is true? (A) the consumer does not exhaust all his income. (B) the consumer spends all of his income on commodity X₁. (C) the consumer spends all of his income on commodity X₂. (D) the consumer spends half of his income on commodity X₁

Also written as: For a Cobb-Douglas Utility function U(X_1, X_2) = X_1 X_2, for given income level and prices of X_1 and X_2 which of the following is true?

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

What this question tests

This question is on Utility maximisation and the interior optimum, part of Budget constraint and consumer equilibrium in Microeconomics.

Choosing the best affordable bundle where an indifference curve is tangent to the budget line, including Cobb-Douglas demand.

TestStop has 20 past-paper questions on this subtopic.

Practise Budget constraint and consumer equilibriumMore on Utility maximisation and the interior optimum

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Question from the UoH 2012 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.