2. David has the utility function u(e,g) = 8,000ln(e) + g, where e represents money spenton education and g represents money spent on other goods. He has M = $50,000 to spend.(i) Suppose that the government gives David a lump-sum subsidy of $L. Find his optimalbundle.(ii) Now suppose that the government gives David a voucher for $V worth of education anda lump-sum subsidy of $(L – V) instead. Find David's optimal bundle. (Assume V < L.)

Given Utility function U=8000lne+g E= education g=Other goods M=$50000 50000=e*Pe+g*Pg

Answered: 2. David has the utility function…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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