1. Consider a household that buys two things: rapid Covid tests and everything else. As we saw in class, for the household to be maximizing its utility, its purchases must satisfy the condition, muT / PT = muE / PE , where mu is the marginal utility of another unit of a good (another rapid test or another unit of everything else) for the household and P is the market price of a good. Assume that there's a single market price for rapid tests, and no special government program providing them.

b. Suppose the household's income falls (for some reason unrelated to the pandemic). How will the household need to modify its consumption of rapid tests and everything else to continue maximizing its utility?