Pavel is deciding which of two video stores to patronize. He has a budget of $50 per month to spend
Question: A consumer allocates income (M) between two goods (x and y) and has the utility function: \(U={{x}^{a}}{{y}^{b}}\). The goods are priced at px and py respectively. Show that the utility maximizing consumption of the goods (assuming no saving from income) yields demand functions of the form:
\(x=\frac{a}{a+b}\frac{M}{{{p}_{x}}}\)
\(y=\frac{b}{a+b}\frac{M}{{{p}_{y}}}\)
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Answer: The solution consists of 2 pages
Deliverables: Word Document![](/images/msword.png)
Deliverables: Word Document
![](/images/msword.png)