With utility function u(x1, x2) = √x1 + x2, has 100 dollars to spend on goods 1 and 2.(a) The prices are p1 = 1 and p2 = 4. Find the optimal bundle x∗1 , x∗2. B)Keep the price of good 1 as p1 = 1 and let p2 be a parameter, p2 = p > 0. Find the optimal bundle as a function of p, x1(p), x2(p) and compute the derivatives x1′ (p), x2′ (p).

With utility function u(x1, x2) = √x1 + x2, has 100 dollars to spend on goods 1 and 2.(a) The prices are p1 = 1 and p2 = 4. Find the optimal bundle x∗1 , x∗2. B)Keep the price of good 1 as p1 = 1 and let p2 be a parameter, p2 = p > 0. Find the optimal bundle as a function of p, x1(p), x2(p) and compute the derivatives x1′ (p), x2′ (p).

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 6QFR

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Question

With utility function u(x1, x2) = √x1 + x2, has 100 dollars to spend on goods 1 and 2.
(a) The prices are p1 = 1 and p2 = 4. Find the optimal bundle x∗1 , x∗2.

B)Keep the price of good 1 as p1 = 1 and let p2 be a parameter, p2 = p > 0. Find the optimal bundle as a function of p, x1(p), x2(p) and compute the derivatives x1′ (p), x2′ (p).

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