Maurice has the following utility function: U (X Y) = 20X+80Y-X^2-2Y^2, where X is his consumption of CDs with a price of $1 and Y is his consumption of movie videos, with a rental price of $2. He plans to spend $41 on both forms of entertainment. Determine the number of CDs and video rentals that will maximize Maurice's utility?

Question

Business

Kamren

19 January, 06:39

Maurice has the following utility function: U (X Y) = 20X+80Y-X^2-2Y^2, where X is his consumption of CDs with a price of $1 and Y is his consumption of movie videos, with a rental price of $2. He plans to spend $41 on both forms of entertainment. Determine the number of CDs and video rentals that will maximize Maurice's utility?

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Answers (1)

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Ciara Moran · Answer 1

7 Cd abd 17 movie videos maximize the utility function in 873

Explanation:

We solve this using excel solver:

A B C D

1. - CD Movie

2. - Price 1 2

3 - Q 7 17

4. - Subtotal 7 34 41

The subtotal are Price per quantity on each product

and then we add them to get the total.

The we write the utility function

=20*B3+80*C3-POWER (B3; 2) - 2*POWER (C3; 2)

Utility 873

We will maximize hat function by changin cell B3 and C3

with the constrain of D4 lower or equalt to 41