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Gingers utility function is U(x, y) = x2y, with associated marginal utility functions MUx = 2xy and
MUy = x2. She has income I = 240 and faces prices Px = $8 and Py = $2. a) Determine Gingers
optimal basket given these prices and her income. b) If the price of y increases to $8 and Gingers
income is unchanged, what must the price of x fall to in order for her to be exactly as well

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Gingers utility function is Ux y x2y with associated .pdf

  • 1. Gingers utility function is U(x, y) = x2y, with associated marginal utility functions MUx = 2xy and MUy = x2. She has income I = 240 and faces prices Px = $8 and Py = $2. a) Determine Gingers optimal basket given these prices and her income. b) If the price of y increases to $8 and Gingers income is unchanged, what must the price of x fall to in order for her to be exactly as well