Suppose an individual’s utility is expressed as U=x^(1/2)y^(1/2)and their constraint is represented by the following: 2x+3y=B=100.
What level of x and y should the individual consume to maximize utility? What is utility at the optimal level of consumption?
What is the shadow price of relaxing the constraint 2x+3y 100 that is, having B=101 rather than B=100?