Question: charlotte spends her income of 2400 on clothing good x...
Charlotte spends her income of $2400 on clothing (good x), and the composite good (good y). The utility Charlotte receives from consuming a basket of clothing and the composite good is
U(x,y) = 2√x + (y/300)
The corresponding marginal utilities are
MUx = 1/√x and MUy = 1/300
Question: Find Charlotte's optimal consumption basket when the price of clothing is Px1 = $50, and the price of the composite good is Py = $1.