a) Discuss the implications of these kinds of preferences. b) In the perfect complements case solve for x1 and x2 as functions of p and Y. c) Suppose y = 10. Under perfect complements is there ever a price p where a consumer chooses not to consume either good? If yes or no tell me why.

a) Discuss the implications of these kinds of preferences. b) In the perfect complements case solve for x1 and x2 as functions of p and Y. c) Suppose y = 10. Under perfect complements is there ever a price p where a consumer chooses not to consume either good? If yes or no tell me why.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter21: Demand: Consumer Choic

Section: Chapter Questions

Problem 1E

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Question

The question is in the attached image. Thank you!

4) Consider the following case of perfect complements,
U (x1, T2) = Min(4æ1,3x2].
Assume the budget constraint, y = px1 + x2, with the price of good 2 nor-
malized to 1.
a) Discuss the implications of these kinds of preferences.
b) In the perfect complements case solve for x1 and x2 as functions of p and
y.
c) Suppose y = 10. Under perfect complements is there ever a price p where
a consumer chooses not to consume either good? If yes or no tell me why.
d) Plot the indifference curves for perfect complements case for various val-
ues of y holding p fixed ( The easiest way to do this is to assign an arbitrary
number to p and then assign different numbers for y and see how your graph
changes). Label all axes correctly.

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