A consumer of two goods has utility u(x1, x2) 12. She can purchase each good i = 1, 2 at a price of pi dollars per unit. Alternatively, she can buy a discount card for fixed fee of c dollars that allows her to purchase good 1 at a price of p₁/2 dollars per unit. (The discount card has no effect on the price of good 2.) The discount card is of no value to the consumer except insofar as it reduces the price she pays for good 1. ( Find this consumer's Marshallian demand for each c> 0. Find this consumer's expenditure function for each c> 0.
A consumer of two goods has utility u(x1, x2) 12. She can purchase each good i = 1, 2 at a price of pi dollars per unit. Alternatively, she can buy a discount card for fixed fee of c dollars that allows her to purchase good 1 at a price of p₁/2 dollars per unit. (The discount card has no effect on the price of good 2.) The discount card is of no value to the consumer except insofar as it reduces the price she pays for good 1. ( Find this consumer's Marshallian demand for each c> 0. Find this consumer's expenditure function for each c> 0.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 8QFR
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