Consider the problem of a consumer who must choose between two typesof goods, good 1 (₁) and good 2 (2) costing respectively p₁ and p2 perunit. He is endowed with an income m and has a utility function u defined byu(x₁, x₂) = √√√x₁ + x₂. 4. By how much and in what direction will the utility function change if theincome changes by 1 unit?5. Find the optimal amounts of good 1 and good 2 the consumer will chooseas well as the maximum utility she will get if p₁ = 2, P24 and m =100.=

Utility function: u(x1, x2) = x1 + x2 Marginal Rate of substitution = dudx1dudx2= 12x11 Price of…

Consider the problem of a consumer who must choose between two types of goods, good 1 (x₁) and good 2 (x2) costing respectively p₁ and p2 per unit. He is endowed with an income m and has a utility function u defined by u(x₁, x₂)=√√x₁ + x₂.

Consider the problem of a consumer who must choose between two types of goods, good 1 (x₁) and good 2 (x2) costing respectively p₁ and p2 per unit. He is endowed with an income m and has a utility function u defined by u(x₁, x₂)=√√x₁ + x₂.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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