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RUNNING HEADER: Utility Maximization
Utility Maximization 2
Given that Kim weekly income is M and prices, 𝑃𝑥 and𝑃𝑦, represent the price sushi dinner and
ice cream soda respectively. Kim problem is to select the affordable bundle that results to
maximizing her utility.
Her feasible set (budget): total expenditure should not exceed income, so we have
𝑃𝑥𝑋 + 𝑃𝑦𝑌 ≤ 𝑀……………………..1
Inequality (1) must hold with equality since more is better at the solution to the Kim problem.
𝑀 = $100
𝑃𝑥 = $15 And 𝑃𝑦 = $2.50
𝑋 = 5 And 𝑌 = 10
For a utility maximize condition 𝑃𝑥𝑋 + 𝑃𝑦𝑌 =...
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