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PEA 2022Question 1mcqEasy

Consider an economy with two goods XX and YY. Let the utility function be given by u(x,y)=Axyu(x,y) = A\sqrt{xy} where A>0A > 0, x0x \geq 0 and y0y \geq 0. The budget constraint is PXx+PYyMP_X x + P_Y y \leq M, with M>0M > 0. Let PX=PY>1P_X = P_Y > 1 and let (x,y)(x^*, y^*) denote the utility maximizing bundle. Then,