please only do: if you can teach explain steps of how to solve each part use lengrange A consumer has utilityu(x₁, x2) = ₁ + x122.Suppose that, because of a shortage of good 1, the government imposes a strict upper limitof on the quantity of good 1 that the consumer can consume. Assume throughout thefollowing that w > P2.x(p, w) =v(p, w) =w+P₂ W-P₂2p1F1.w+p22p₁The interior solution is indeed a mar because of converity and monotonicity.(c) Find the consumer's expenditure function.Solution: Using the answer to part (b), the indirect utility is1+w+P₂127-12) if w+1² < 31.otherwise."10-PiP2w+P22P1(1( ₁ (1+²)w-P22p21 +22²) i2p₂| Suppose that p₁ = P2, w = 3p₁, and F₁ = 1. If the government removes the restrictionon consumption of good 1, the price of good 1 will rise from pi to p₁, and p2 and w willremain the same. For what values of p₁ and p does the consumer prefer that the limitremain in place?2p₁Solution: For the given values, >₁. Hence with the restriction, the consumerchooses x₁ = 1 and r2 = 2 giving utility 3. Without the restriction, the consumer choosesaccording to the interior solution we found in part (b), giving utility≤ 1,otherwise.4p1P₁Therefore, she (strictly) prefers that the limit remain if and only if 3p > 4p₁.

Answered: Image /qna-images/answer/96ae83d1-60fb-4d20-9d57-aa6735d88ac0.jpg

A consumer has utility (₁,₂)=₁+122. Suppose that, because of a shortage of good 1, the government imposes a strict upper limit of 7₁ on the quantity of good 1 that the consumer can consume. Assume throughout the following that w>p2. z(p, w) = 2p1 (+2², 17722) if 102 ≤7₂, (7₁,-²) otherwise. P2

A consumer has utility (₁,₂)=₁+122. Suppose that, because of a shortage of good 1, the government imposes a strict upper limit of 7₁ on the quantity of good 1 that the consumer can consume. Assume throughout the following that w>p2. z(p, w) = 2p1 (+2², 17722) if 102 ≤7₂, (7₁,-²) otherwise. P2

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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