Question

For the utility function u(x, y) = xy and given budget constraint M = pxx+pyy. what is the optimum bundle of consumption of x and y?

• A. $(\frac{M}{P_x},\frac{M}{P_y})$
• B. $(\frac{M}{2P_x},\frac{M}{2P_y})$
• C. $(\frac{M}{P_y},\frac{M}{P_x})$
• D. $(\frac{M}{P_y},\frac{M}{P_x})$

Answer 1

Answer: (B)

$(\frac{M}{2P_x},\frac{M}{2P_y})$

Answer 2

The correct answer is (B) : $(\frac{M}{2P_x},\frac{M}{2P_y})$