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Assume that a consumer has the utility lnction U(x1 , x2) = x1x2 , where x1 and 16; represent the amounts of two goods, 1
Assume that a consumer has the utility lnction U(x1 , x2) = x1x2 , where x1 and 16; represent the amounts of two goods, 1 and 2. The consumer faces the budget constraint 5 x1 + 4 x2 5 50. In addition, the consumer faces a rationing constraint: the ration point \"prices\" of 3:1 and x2 are 3 and 6, respectively, and the consumer is issued a total of 40 ration points. This rationing constraint can be written as 3 x1 + 6 x2 5 40. a) Find the values of x1 and x2 the consumer will choose. b) What is the marginal utility of income at the equilibrium ? c) What is the marginal value of a ration point at the equilibrium ? d) Illustrate your solution graphically, with quantities on the axes
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