Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4. (25 PTs) Consider a consumer whose preference is given by the utility function u(x1x2) = x1 + x2. The consumer has an income of

image text in transcribed
image text in transcribed
4. (25 PTs) Consider a consumer whose preference is given by the utility function u(x1x2) = x1 + x2. The consumer has an income of w and faces prices p and 1 for goods 1 and 2 respectively. Assume p at 1. Goods cannot be consumed in negative amounts and the consumer need not spend all his income. (i) (3 PTS) Write down the optimisation problem of the consumer along with any non-negativity restrictions. (ii) (4 PTS) Prove whether the two conditions for Kuhn-Tucker's theorem satised. (iii) (9 PTS) Write down the Lagrange function and nd the critical points of this optimisation problem. (iv) (4 PTS) Is the critical point you found a global maximum? Prove or disprove. (v) (5 PTS) Write down the demand function for good 1 in terms of p and draw it in a graph. Is this function differentiable? Please answer the following questions, thank you

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Trigonometry (Subscription)

Authors: Mark Dugopolski

5th Edition

0135207487, 9780135207482

More Books

Students also viewed these Mathematics questions

Question

3. Im trying to point out what we need to do to make this happen

Answered: 1 week ago

Question

1. I try to create an image of the message

Answered: 1 week ago