Question2: Imagine a basic economy with only two goods: food and water. If food is represented by x, and water is represented by y, and the utility function is a standard Cobb-Douglas function with equal weights such that:
U(x,y)= x^0.5 y^0.5
Suppose the price of food is $10, the price of water is $5, and your income is $100. a. What is your budget constraint for food and water? b. What is the MRS of food and water? c. What is the optimal quantity of food? d. What is the optimal quantity of water? e. What is the maximum level of utility reached by these choices?