Microeconomics
Microeconomics
10th Edition
ISBN: 9781259655500
Author: David C Colander
Publisher: McGraw-Hill Education
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Chapter 14, Problem 5IP

a)

To determine

The reason for magazines offering special deals to students.

b)

To determine

Th effect of getting discount to the most of the subscribers.

c)

To determine

The reason for the magazines selling their subscriptions at a cheaper rate.

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The preferences of a consumer are represented by the following utility function: U = min (×1, 2x2) If income is 100 and p1=p2=1 a) What is the optimal bundle? b) If p₁=4, what is the new optimal bundle? c) If p2=4, what is the new optimal bundle? d) Decompose the price effect into income and substitution effect and provide a graphical representation of your results.
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