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5. Martha has utility function u(x1, x2) = min{x1, 2x2}. Her budget m = $30. Prices are p = $2, p2= $1. a. (2pts)
5. Martha has utility function u(x1, x2) = min{x1, 2x2}. Her budget m = $30. Prices are p = $2, p2= $1. a. (2pts) Plot the budget line and an indifference curve to indicate where the optimal bundle is. (2pts) Now solve for the exact optimal bundle (x*, x2*) using appropriate conditions. b. c. (2pts) At what price levels p, p2 will Martha want to consume more good 2 than good 1?
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a The price of good 1 is 2 and the price of good 2 is 1 Thus expenditure on good 1 is 2x1 and expend...
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
