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4. Suppose an agent has utility function u(12.93)min1q243), where these goods have respective prices pi-4 and p2-p,-3. Supposing the agent has wealth of W-24, how much of each good will the agent consume?
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Answer #1

We have the following budget equation
W= 24= p1q1 + p2q2+ p3q3 = 4q1 + 3q2 + 3q3
We maximise the utility function, U subject to W using the Langrajian Multiplier, Lambda

See the attached:

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2 4 2 and 3


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