2) Now suppose the prices change to q = (91, 92) = (2,1). Again, obtain the optimal choices for Ad= (d₁, d2). Solve for c and d.and B, denote them by c == (C₁,(C₁, C2)C₂) andand d Question 3 A certain household comprises of a couple, Adam (A) and Betty (B). They havelexicographic preferences over two goods G1 and G2 - A wants to consume as much of G1 as possible,before moving on to G2 whereas, for B, it is the opposite, she wants to consume as much of G2 aspossible before moving on to G1.¹ Given their varying preferences, they decide to shop separately,after dividing the household income equally. The household income is $8.One difference to the usual setting - there are government restrictions in place so that no individualis allowed to buy more than two units of either good.Hint: Do not use mathematical brute force (like Calculus) to solve this problem. A simple diagramwith appropriate budget lines, etc. should suffice.

Answered: 2) Now suppose the prices change to q=…

2) Now suppose the prices change to q= (91, 92) = (2,1). Again, obtain the optimal choices for A and B, denote them by c = (C₁, C2) and d= (d₁, d2). Solve for c and d.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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