Asked by Kaylee Greydanus on May 21, 2024
Verified
Donald consumes goods x and y.His utility function is U(x, y) xy3.He is endowed with 10 units of x and 15 units of y.The price of x is $1 and the price of y is $2.Find his net demand for x.
A) 15
B) 0
C) 12
D) 3
E) 20
Net Demand
The difference between the total demand for a product or service and the total supply of it in the market.
Endowment
In economics, the total resources available to an individual or entity, including assets, income, and inherited resources.
- Invoke budget constraint concepts to explore the decision-making between occupational engagement and leisure time.
Verified Answer
SS
Shahu SeemaMay 22, 2024
Final Answer :
B
Explanation :
Given the utility function U(x, y) = xy, Donald's endowment, and the prices of x and y, his net demand for x is 0 because he will consume his endowment without needing to purchase more or sell any of his initial endowment.
Learning Objectives
- Invoke budget constraint concepts to explore the decision-making between occupational engagement and leisure time.