4. [This question gives us some practice using calculus to think about a utility's properties, and to solve the consumer's problem.] Suppose the consumer's utility is given by u(x) = −(x1 − 1)² – (x2 − 1)², and their income and prices are given by (m, p₁, p2) = (3,2,2). In what follows, you may take it for granted that the consumer has some optimal solution to the consumer's problem. (a) Given r e X, write a formula for the marginal utilities MU₁(x) and MU₂(x). (b) Show that these preferences are not increasing on X(p, m). (c) Show that the conusmer will optimally spend all their money. [Hint: The previous question's first part may be useful.] (d) Explain why the consumer's preferences are convex. (e) What is the consumer's optimal bundle from their budget set?
4. [This question gives us some practice using calculus to think about a utility's properties, and to solve the consumer's problem.] Suppose the consumer's utility is given by u(x) = −(x1 − 1)² – (x2 − 1)², and their income and prices are given by (m, p₁, p2) = (3,2,2). In what follows, you may take it for granted that the consumer has some optimal solution to the consumer's problem. (a) Given r e X, write a formula for the marginal utilities MU₁(x) and MU₂(x). (b) Show that these preferences are not increasing on X(p, m). (c) Show that the conusmer will optimally spend all their money. [Hint: The previous question's first part may be useful.] (d) Explain why the consumer's preferences are convex. (e) What is the consumer's optimal bundle from their budget set?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![4. [This question gives us some practice using calculus to think about a utility's
properties, and to solve the consumer's problem.]
-
Suppose the consumer's utility is given by u(x) = −(x₁ − 1)² – (x2 − 1)², and
their income and prices are given by (m, p1, p2) = (3,2,2). In what follows, you
may take it for granted that the consumer has some optimal solution to the
consumer's problem.
(a) Given re X, write a formula for the marginal utilities MU₁(r) and
MU₂(x).
(b) Show that these preferences are not increasing on X(p, m).
(c) Show that the conusmer will optimally spend all their money. [Hint: The
previous question's first part may be useful.]
(d) Explain why the consumer's preferences are convex.
(e) What is the consumer's optimal bundle from their budget set?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd86cda1-af2d-4585-b012-7ab18b7ef9b3%2F18989bdf-d6fa-4b70-8ff5-1d3eead8e9db%2Fhi2pxal_processed.jpeg&w=3840&q=75)
Transcribed Image Text:4. [This question gives us some practice using calculus to think about a utility's
properties, and to solve the consumer's problem.]
-
Suppose the consumer's utility is given by u(x) = −(x₁ − 1)² – (x2 − 1)², and
their income and prices are given by (m, p1, p2) = (3,2,2). In what follows, you
may take it for granted that the consumer has some optimal solution to the
consumer's problem.
(a) Given re X, write a formula for the marginal utilities MU₁(r) and
MU₂(x).
(b) Show that these preferences are not increasing on X(p, m).
(c) Show that the conusmer will optimally spend all their money. [Hint: The
previous question's first part may be useful.]
(d) Explain why the consumer's preferences are convex.
(e) What is the consumer's optimal bundle from their budget set?
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