Two friends, Minrui and Jing, share a flat and both consume internet (i) and all other goods (g). The utility function for Minrui is U_m=i^(0.3)g^(0.7) whereas the utility function for Jing is U_m=i^(0.1)g^(0.9). Considering that the income of both individuals are the same $500 and that the prices are p_i= $80 and p_g = $5, what would be the optimal allocation of public good (i) and private good (g)? Interpret your answer.

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Chapter1: Making Economics Decisions
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Economics
Two friends, Minrui and Jing, share a flat
and both consume internet (i) and all other
goods (g). The
utility function for Minrui is
U_m=i^(0.3)g^(0.7) whereas the utility
function for Jing is U_m=i^(0.1)g^(0.9).
Considering that the income of both
individuals are the same $500 and that the
prices are p_i = $80
and p_g = $5, what would be the optimal
allocation of public good (i) and private
good (g)? Interpret
your answer.
Transcribed Image Text:Economics Two friends, Minrui and Jing, share a flat and both consume internet (i) and all other goods (g). The utility function for Minrui is U_m=i^(0.3)g^(0.7) whereas the utility function for Jing is U_m=i^(0.1)g^(0.9). Considering that the income of both individuals are the same $500 and that the prices are p_i = $80 and p_g = $5, what would be the optimal allocation of public good (i) and private good (g)? Interpret your answer.
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