a) Assume that an individual consumes two goods, and achieves the benegàby çonsuming respectively i x and x units of each of the goods. Define the terms indifference curve and budget condition, and show the consumer benefit-maximizing good combination in a chart. Explain why this one the combination solves the utility maximization problem. b) Assume that the preferences of the consumer can be expressed by the utility function x* + x, 0.5 wx),4 and that the price per unit x 1 is p =, the price per unit x 2 is 2 p = and that the income ( m) is 200. Find the consumer's optimal choice in this case.

a) Assume that an individual consumes two goods, and achieves the benegàby çonsuming respectively i x and x units of each of the goods. Define the terms indifference curve and budget condition, and show the consumer benefit-maximizing good combination in a chart. Explain why this one the combination solves the utility maximization problem. b) Assume that the preferences of the consumer can be expressed by the utility function x* + x, 0.5 wx),4 and that the price per unit x 1 is p =, the price per unit x 2 is 2 p = and that the income ( m) is 200. Find the consumer's optimal choice in this case.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

a) Assume that an individual consumes two goods, and achieves the benetby çonsuming
respectively 1 x and x units of each of the goods.
Define the terms indifference curve and budget condition, and show the consumer
benefit-maximizing good combination in a chart. Explain why this one
the combination solves the utility maximization problem.
b) Assume that the preferences of the consumer can be expressed by the utility function
W),4
+ X,
2
and that the price per unit x 1 is p =, the price per unit x 2 is 2
p= and that
the income ( m ) is 200. Find the consumer's optimal choice in this case.

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