Budget Constraint
Income (M) 100
Price of X (Pₓ) 2
Price of Y (Pᵧ) 2
M = Pₓ·X + Pᵧ·Y
Utility Function (Cobb-Douglas)
Preference α 0.50
U(X,Y) = Xα · Y(1-α)
Tangency Condition
MRS = Pₓ/Pᵧ
(αY) / ((1-α)X) = Pₓ/Pᵧ
Optimal Bundle
X* 25.0
Y* 25.0
Utility U* 25.0
MRS at optimum 1.00
Price ratio Pₓ/Pᵧ 1.00
Budget Constraint
Optimal Indifference Curve
Other Indifference Curves
Optimal Bundle (X*, Y*)