Consider the following utility function: u(x1,x2) = x1 + x2.(A):i) Restate the consumer problem.ii) Form the Lagrangian function.iii) Find the first-order-conditions (FOC).iv) Divide Lx, by Lx,-v) From iv), can you determine the type of goods 1 and 2 are?(В):Draw the indifference curves for U = X1 + x2, where U = 1 and 2.What happens to the optimal demand for good 1, when:P1 < P22. P1 > P21.3. Pi = P2

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Consider the following utility function: u(x1,x2) = x1 + x2. (A): i) Restate the consumer problem. ii) Form the Lagrangian function. iii) Find the first-order-conditions (FOC). iv) Divide Lx, by Lx2- v) From iv), can you determine the type of goods 1 and 2 are?

Consider the following utility function: u(x1,x2) = x1 + x2. (A): i) Restate the consumer problem. ii) Form the Lagrangian function. iii) Find the first-order-conditions (FOC). iv) Divide Lx, by Lx2- v) From iv), can you determine the type of goods 1 and 2 are?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics

Section: Chapter Questions

Problem 1WNG

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Q1: (I)Asma eats only apples and almonds. Her level of income is $36, Price of apple (Pa) is $2 per kg and price of almond (Pl) is $6 per kg. The preferences of Asma are represented by the following utility function Utility U= 10*Qa + 40*Ql where Qa and Ql are Asam’s consumption of Apples and almonds. (a) which kind of preferences Asma has? (b) Find Utility per dollar spent on apple and almond (c) Find Marginal rate of substitution and interpret it (d) Find utility maximizing values of apples and almond and show graphically