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Questions › UoH › UoH 2017 › Q80
1 mark, −0.33Microeconomics › Budget constraint and consumer equilibrium › Utility maximisation and the interior optimumModerateabout 2 min

UoH 2017 Question 80: Budget constraint and consumer equilibrium

For a consumer having the total utility function U(x1,x2)=x10.5x20.5U(x_1, x_2) = x_1^{0.5} x_2^{0.5}U(x1​,x2​)=x10.5​x20.5​, with p1=2p_1 = 2p1​=2 and p2=5p_2 = 5p2​=5 being prices of commodities x1x_1x1​ and x2x_2x2​ and a given income of 100, the quantities of demand for commodity x2x_2x2​ and x1x_1x1​ are given by:

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For a consumer having the total utility function U(x₁, x₂) = x₁⁰·⁵ x₂⁰·⁵, with p₁ = 2 and p₂ = 5 being prices of commodities x₁ and x₂ and a given income of 100, the quantities of demand for commodity x₂ and x₁ are given by: (A) X₂ = 50 and X₁ = 5 (B) X₂ = 25 and X₁ = 10 (C) X₂ = 10 and X₁ = 25 (D) X₂ = 2 and X₁ = 5

Also written as: For a consumer having the total utility function U(x_1, x_2) = x_1^(0.5) x_2^(0.5), with p_1 = 2 and p_2 = 5 being prices of commodities x_1 and x_2 and a given income of 100, the quantities of demand for commodity x_2 and x_1 are given by:

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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