A.1 Individuals in a market each have a total budget y to spend on two goods q1 and q2 at the prices p1 and p2 respectively. Their preferences are described by the utility function Bqı – (A – 92)° , if q2 < A; и (q1, Ф2) — (1) Bq1, if q2 > A; where A, B > 0 are preference parameters. (a) Show that the quantity demanded of good 2 is if - Bp2 2 < ; P2 f2 (y, P1, P2) А — В2, if - Вр 0, if < 2 P1 Assume for parts (b) and (c) that prices are such that individuals consume positive quantities of both goods. (b) Find the expenditure function corresponding to these preferences. V

Q: b) Given that U = (X,X2), show that the following: %3D If utility function is additive then at most…

A: Utility Function The utility function tells us the satisfaction of using one good for other goods.…

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A: U(x,y) = (x+2)(y+1) Budget Constraint = Px*x + Py*y = I

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A:

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A: is

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Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.