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2. Consider the representative household in the static two-good consumption model Whose preferences are represented by u(c1, c2) = 1/01 + ' mg, with each

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2. Consider the representative household in the static two-good consumption model Whose preferences are represented by u(c1, c2) = 1/01 + ' mg, with each good priced at P1 and P2. The household receives an exogenous amount of income, Y. (a) Using a Lagrangian, and derive the rst order conditions for 01 and Cg. (b) Use the rstorder conditions to derive the consumer's optimality condition. (c) Solve for the demand functions of 01 and c2

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