Consider the indifference map given by: , where is a measure of utility.
A budget curve gives the set of possible consumption choices with a given income. If you have an income of $616 and the price of good X is given by , and the price of good Y given by . The equation for the budget line is given by: .
A utility maximizing combination of goods X and Y occurs when the budget line is tangent to a indifference curve.
Find X as a function of its price. (If Y represents all other goods, than this function is just a demand curve for X).
(Use px for )
Let and be the values for X and U when and .
(you will lose 25% of your points if you do)
You can earn partial credit on this problem.