Question

​Andy's utility function for goods X and Y is linear and is given by​ U(X,Y) = 2X​ + 3Y. Based on this utility​ function, we can conclude that goods X and Y are perfect substitutes for Andy. The price of X is​ $4, the price of Y is​ $8, and​ Andy's income is​ $40. To maximize his​ utility, Andy should purchase 10 units of X and 0 units of Y. ​(Enter your responses as real numbers rounded to one decimal​ place.)

Answer 1

True

Step-by-step explanation:

U(X,Y) = 2X​ + 3Y

X= $4

Y= $8

Income = $40

Utility purchasing 10 units of X: U(10,0) = 2x10​ + 3x0 = 20

Utility purchasing 5 units of Y: U(0,5) = 2x0​ + 3x5 = 15

While Y cost twice the cost of X, its utility is only a 50% percent more.