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A consumer has a direct utility function of the form Good 1 is a discrete: i.e. the only consumption levels of good 1 are x1
A consumer has a direct utility function of the form
Good 1 is a discrete: i.e. the only consumption levels of good 1 are x1 = 0
and x1 = 1. For convenience, assume that u(0) = 0 and p2 = 1
(a) What kind of preferences does this consumer have?
(b) For determine the Marshallian demand functions of the consumer.
(c) Why the assumption that p2 = 1 necessary in this problem?
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