Suppose u(x) = max{arı, ßr₂} for parameters a, ß > 0. (a) Will this consumer will spend all their money (i.e. choose z" so that px = m)? Why or why not? (b) Show that either i - of the two goods. 0 or r2 = 0 that is, the consumer buys only one (c) Solve the consumer's problem. What is ? [Hint 1: The first question, and the previous part of this question, might be helpful here. Hint 2: The price ratio might be relevant to the consumer's behavior.] בין
Suppose u(x) = max{arı, ßr₂} for parameters a, ß > 0. (a) Will this consumer will spend all their money (i.e. choose z" so that px = m)? Why or why not? (b) Show that either i - of the two goods. 0 or r2 = 0 that is, the consumer buys only one (c) Solve the consumer's problem. What is ? [Hint 1: The first question, and the previous part of this question, might be helpful here. Hint 2: The price ratio might be relevant to the consumer's behavior.] בין
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![5. Suppose u(x) = max{ar₁, ßr2} for parameters a, ß > 0).
(a) Will this consumer will spend all their money (i.e. choose z so that
px = m)? Why or why not?
(b) Show that either r = 0 or r2 = 0 that is, the consumer buys only one
of the two goods.
(c) Solve the consumer's problem. What is z? [Hint 1: The first question,
and the previous part of this question, might be helpful here. Hint 2: The
price ratio might be relevant to the consumer's behavior.]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd86cda1-af2d-4585-b012-7ab18b7ef9b3%2F44413dd4-f17d-427b-aee6-723af9b7fd50%2Fbyk2dr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5. Suppose u(x) = max{ar₁, ßr2} for parameters a, ß > 0).
(a) Will this consumer will spend all their money (i.e. choose z so that
px = m)? Why or why not?
(b) Show that either r = 0 or r2 = 0 that is, the consumer buys only one
of the two goods.
(c) Solve the consumer's problem. What is z? [Hint 1: The first question,
and the previous part of this question, might be helpful here. Hint 2: The
price ratio might be relevant to the consumer's behavior.]
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