Economics Terms Exercise - Lagrangian Optimization
Consider someone with a Cobb-Douglas utility function equal to U(q1,q2) = 3q1(½)*q2(½) who is buying groceries and choosing to buy a mix of steak (good 1) and potatoes (good 2). Assume for this shopping trip that they have a budget of 40 dollars. Potatoes cost 3 dollars per potato, and steak costs 10 dollars per steak. How much of each good should they buy to maximize their utility? What is the total utility achieved at this optimal product mix?
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