2. This question looks at the consumer's choice of car miles driven. Suppose that there are two...
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2. This question looks at the consumer's choice of car miles driven. Suppose that there are two goods, a composite good x and car miles driven y. The price of the composite good is one and the price of car miles driven is p. The consumer has income I. The consumer's utility function has the quasi-linear form U (x, y) = x + v(y). a) Formulate the consumer's problem of maximizing utility subject to a budget constraint. Use the Lagrange multiplier method to characterize the equations that describe the optimal choice of x and y. b) Determine the marginal utility of income in this problem. c) Does the quantity of miles depend on income? Explain
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