Quiz Four Question for Managerial Economics | FIN 30210, Quizzes of Managerial Economics

Download Quiz Four Question for Managerial Economics | FIN 30210 and more Quizzes Managerial Economics in PDF only on Docsity! Finance 30210 Quiz #4 Name__________________________ 1) Suppose that the price of good X is $5 and the price of good Y is $3. You have $100 to spend and your preferences over X and Y are defined as ( ) 4 3 4 1 , yxyxU = Calculate your optimal choice of X and Y. We can write the lagrangian as follows: ( )yxyx 351004 3 4 1 −−+= λl Take the derivative with respect to X and Y: 03 4 3 05 4 1 4 1 4 1 4 3 4 3 =− =− − − λ λ yx yx Solve each for lambda and then set them equal to one another: 3 4 3 5 4 1 4 1 4 1 4 3 4 3 −− == yxyx λ Rearrange and simplify to get xy 5= Plug into the budget constraint ( ) 25,510053510035 ==⇒=+⇒=+ yxxxyx