Given the values α = 6, β = 2, px = 2, py = 3 and I = 24, we can substitute these into the equations we derived for the optimal consumption bundle (x*, y*).

Step 1: Calculate x*
x* = I/(px + β*px)
x* = 24/(2 + 2*2)
x* = 24/6
x* = 4

Step 2: Calculate y*
y* = (β*px/α*py)*I/(px + β*px)
y* = (2*2/6*3)*24/(2 + 2*2)
y* = 8/18*24/6
y* = 4/3*4
y* = 16/3

So, Joe's optimal choice is to consume 4 units of good x and 16/3 units of good y.

Question

Given the values α = 6, β = 2, px = 2, py = 3 and I = 24, we can substitute these into the equations we derived for the optimal consumption bundle (x*, y*).

Step 1: Calculate x*
x* = I/(px + β*px)
x* = 24/(2 + 2*2)
x* = 24/6
x* = 4

Step 2: Calculate y*
y* = (β*px/α*py)*I/(px + β*px)
y* = (2*2/6*3)*24/(2 + 2*2)
y* = 8/18*24/6
y* = 4/3*4
y* = 16/3

So, Joe's optimal choice is to consume 4 units of good x and 16/3 units of good y.

Knowee AI · Accepted Answer

Given the values α = 6, β = 2, px = 2, py = 3 and I = 24, we can substitute these into the equations we derived for the optimal consumption bundle (x*, y*).

Step 1: Calculate x*
x* = I/(px + β*px)
x* = 24/(2 + 2*2)
x* = 24/6
x* = 4

Step 2: Calculate y*
y* = (β*px/α*py)*I/(px + β*px)
y* = (2*2/6*3)*24/(2 + 2*2)
y* = 8/18*24/6
y* = 4/3*4
y* = 16/3

So, Joe's optimal choice is to consume 4 units of good x and 16/3 units of good y.

(b) Now, suppose α = 6, β = 2, px = 2, py = 3 and I = 24. Evaluate Joe’s optimal choice.

Question

(b) Now, suppose $\alpha = 6$ , $\beta = 2$ , $p_x = 2$ , $p_y = 3$ and $I = 24$ . Evaluate Joe’s optimal choice.

Solution

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