New SIDBI Grade A New Batch Starts on Nov 18

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    Question

    A consumer has utility function given by : u{x1,x2} = min {2x1+x2, x1+2x2}. Given income m = 100, prices p1 = 20, p2 = 30, the amount of x1 in her utility maximizing bundle is:

    A 5 Correct Answer Incorrect Answer
    B 2 Correct Answer Incorrect Answer
    C 7 Correct Answer Incorrect Answer
    E 9 Correct Answer Incorrect Answer

    Solution

    2x1+x2 = x1+2x2 S0, x1 = x2 Equate x1=x2 then put this in budget line. Solve for equilibrium bundle of x1 and x2. So, 20x1 + 30x2 = 100 50x1 = 100

    X1 = 2 = x2

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