3.a. M = PFF + PCCdU/dF = PF/PC0.5aF-0.5 = PF/PCF = (0.5aPC/PF)2M = PF(0.5aPC/PF)2 + PCCM =...

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3.a. M = PFF + PCCdU/dF = PF/PC0.5aF-0.5 = PF/PCF = (0.5aPC/PF)2M = PF(0.5aPC/PF)2 + PCCM = 0.25a2PC2/PF + PCCC = [M - 0.25a2PC2/PF]/PCb.F = [ XXXXXXXXXX)/(3)]2F = 452 = 20256975 = XXXXXXXXXXC45C = XXXXXXXXXX, C = 900/45 = 20
	
Document Preview: 3.	a. M = PFF + PCC	dU/dF = PF/PC	0.5aF-0.5 = PF/PC	F = (0.5aPC/PF)2	M = PF(0.5aPC/PF)2 + PCC	M = 0.25a2PC2/PF + PCC	C = [M - 0.25a2PC2/PF]/PCb. F = [ XXXXXXXXXX)/(3)]2F = 452 = 20256975 = XXXXXXXXXXC45C = XXXXXXXXXX, C = 900/45 = 20

David · Accepted Answer

The question provides a utility function: U(F,C) = a(F^0.5) + C, and asks me to find the demand 
for goods F (food) and C (clothing), which I did in the attached file 3a. (Pf and Pc being the 
prices of F and C) Then I was provided with information of the budget (M = 6975) and other 
variables (Pf = 3, Pc = 45, a = 6). At this point, I was asked to find the demand for food and 
clothing, which I did in the attached file 3b. 
However, at the next question I became stuck, where the question lowers Pf to 2.50, and when I 
substituted the values in, the result of F's bundle cost comes in 7290,

3. a. M = P F F + P C C dU/dF = P F /P C 0.5aF -0.5 = P F /P C F = (0.5aP C /P F ) 2 M = P F (0.5aP C /P F ) 2 + P C C M = 0.25a 2 P C 2 /P F + P C C C = [M - 0.25a 2 P C 2 /P F ]/P C b. F = [...

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