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There are 2 goods, x, and x2 and their prices are p₁ = 2 and P2 2, 1 2 = 1 respectively. The utility function is U(x,x) = x + x2 If income level is m = 6, write down the budget constraint. What is the optimal consumption bundle that maximizes the utility? Illustrate your answer graphically, and find the corresponding level of utility. Solve the same problem for an individual with a utility 2 2 function given by U(x₁₁x2) = 5x₁ + x2 .

There are 2 goods, x, and x2 and their prices are p₁ = 2 and P2 2, 1 2 = 1 respectively. The utility function is U(x,x) = x + x2 If income level is m = 6, write down the budget constraint. What is the optimal consumption bundle that maximizes the utility? Illustrate your answer graphically, and find the corresponding level of utility. Solve the same problem for an individual with a utility 2 2 function given by U(x₁₁x2) = 5x₁ + x2 .

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.2P
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There are 2 goods, x, and x2 and their prices are p₁ = 2 and P2 2, 1 2 = 1 respectively. The utility function is U(x,x) = x + x2 If income level is m = 6, write down the budget constraint. What is the optimal consumption bundle that maximizes the utility? Illustrate your answer graphically, and find the corresponding level of utility. Solve the same problem for an individual with a utility 2 2 function given by U(x₁₁x2) = 5x₁ + x2 .
Transcribed Image Text:There are 2 goods, x, and x2 and their prices are p₁ = 2 and P2 2, 1 2 = 1 respectively. The utility function is U(x,x) = x + x2 If income level is m = 6, write down the budget constraint. What is the optimal consumption bundle that maximizes the utility? Illustrate your answer graphically, and find the corresponding level of utility. Solve the same problem for an individual with a utility 2 2 function given by U(x₁₁x2) = 5x₁ + x2 .
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