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1. Answer all parts (a) to (e) of this question. A consumer has an income of m available for expenditure on two goods. The price
1. Answer all parts (a) to (e) of this question. A consumer has an income of m available for expenditure on two goods. The price of good 1 is p and the price of good 2 is one. If he consumes x 2 0 units of good 1 and y 2 0 units of good 2, his utility is: u(, y) = 1+x (y +1)8, where a E (0, 1) and B E (0, 1). We also assume that m > a/ 3.(c) [15 marks] Suppose that the second order conditions are satised. Solve the rst-order conditions to obtain the consumer's demands for :r and y as functions of p and m. Explain where you use the assumption m > (is/,8
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