Suppose that the total utility function of a consumer is given by TU(x,y) = 4xy+2 y and the prices of X and Y are 1 Birr and 2 Birr per unit, respectively. If the income of the consumer is 60 Birr and if he spends all of his income on the consumption of commodities of X and Y, a. Find the optimum amount of X and Y that the consumer will consume at equilibrium b. Find MRTSx,y . c. Draw the budget line d. What happens to the original budget line if the budget falls by 50%? e. What happens to the original budget line if the price of X doubles? f. What happens to the original budget line if the price of Y increases to 4?

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Suppose that the total utility function of a consumer is given by TU(x,y) = 4xy+2 y and the prices of
X and Y are 1 Birr and 2 Birr per unit, respectively. If the income of the consumer is 60 Birr and if he
spends all of his income on the consumption of commodities of X and Y,
a. Find the optimum amount of X and Y that the consumer will consume at equilibrium
b. Find MRTSx,y .
c. Draw the budget line
d. What happens to the original budget line if the budget falls by 50%?
e. What happens to the original budget line if the price of X doubles?
f. What happens to the original budget line if the price of Y increases to 4?

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