00:01
Hello, let's start with the first question.
00:09
Jane's utility function is given and her income is 2 and the price of y is also 2.
00:20
And the cost per unit of x depends on how many units she buys.
00:26
So the total cost of x units of good x is a square root of x.
00:32
So let's look to the several combinations.
00:43
Since we have only $2, we can divide by this way, we can spend $0 for good x and $2 for good y.
00:56
In this case, the amount of utility will be, so when we have $0, we buy only zero amounts of plus 2 times 2 it's 4 units of utility.
01:13
If we buy 1 amount of x and 1, if we spend $1 for good x and 1 for good y, we will have 1 the square root of 1, oh sorry it's not square root it's 1 in the second power plus 2 times y, it's 2 times 1, it's 2.
01:46
So 1 plus 2 is 3, and as we can see, we have less utility.
01:54
And let's look to the last extreme case...