If Charlie's utility function is X 4 A X B , the price of apples is p A , the price of bananas is p B , and his income is m, then Charlie's demand for apples will beA) m/(2p A ) .B) 0.25 p A m.C) m/(p A  p B ) .D) 0.08m/p A .E) 1.25p B m/p A .

Question

If Charlie's utility function is X  4 A  X B , the price of apples is p A , the price of bananas is p B , and his income is m, then Charlie's demand for apples will beA) m/(2p A ) .B) 0.25 p A m.C) m/(p A     p B ) .D) 0.08m/p A .E) 1.25p B  m/p A .

Tanner Tresemer · Accepted Answer

Final Answer : D, Explanation :  Using the utility maximization rule of equating marginal utility to price, we get:MU of apples / p of apples = MU of bananas / p of bananasUsing the given utility function, we get:(14S1 - S1) / p A  = B1 / p B Simplifying and solving for S1, we get:S1 = (B1 / 14) * p A  / p B Substituting S1 in the budget constraint, we get:(  + S1U1P0) * p A  + B1 * p B  = mSolving for B1, we get:B1 = (m - p A    ) / p B Substituting the value of B1 in the expression above, we get:S1 = (m - p A    ) / (14p A  + p B )Substituting the value of S1 in the demand function for apples, we get:X =   = (m - p A    ) / (14p A  + p B ) * 0.08Simplifying, we get:X = 0.08m / p A

If Charlie's utility function is X ⁴_AX_B, the price of apples is p_A, the price of bananas is p_B, and his income is m, then Charlie's demand for apples will be

A) m/(2p_A) .
B) 0.25 p_Am.
C) m/(p_A  p_B) .
D) 0.08m/p_A.
E) 1.25p_B m/p_A.

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Learning Objectives

Learning Objectives

Related questions

If Charlie's utility function is X 4A XB, the price of apples is pA, the price of bananas is pB, and his income is m, then Charlie's demand for apples will beA) m/(2pA) .B) 0.25 pAm.C) m/(pA  pB) .D) 0.08m/pA.E) 1.25pB m/pA.

Definitions

Learning Objectives

Learning Objectives

Related questions

If Charlie's utility function is X ⁴_AX_B, the price of apples is p_A, the price of bananas is p_B, and his income is m, then Charlie's demand for apples will be

A) m/(2p_A) .
B) 0.25 p_Am.
C) m/(p_A  p_B) .
D) 0.08m/p_A.
E) 1.25p_B m/p_A.