Question
Microeconomics Question on Utility Function
Consider a two good economy where a denotes consumption of apricots and b denotes consumption of bananas. Anu's utility function is UAnu (a, b) = a + 2b, and Binu's utility function is UBinu (a, b) = min{a, 2b}. Anu initially has no apricots and 12 bananas. Binu initially has 12 apricots and no bananas. In the competitive equilibrium, which one of the following will be Anu's optimal consumption bundle ?
A
6 apricots and 9 bananas
B
9 apricots and 9 bananas
C
4 apricots and 10 bananas
D
0 apricots and 12 bananas
Answer
6 apricots and 9 bananas
Explanation
Solution
The correct option is (A) : 6 apricots and 9 bananas.