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Assume that Moe has utility over x1 and x2 given by u(x1, x2) = 2x1 + x2. He has income m and the price of
Assume that Moe has utility over x1 and x2 given by u(x1, x2) = 2x1 + x2.
He has income m and the price of good 2 is normalized to one. Throughout
this problem, you may assume that p1 and m are such that an interior
amount of x1 and x2 is chosen.
(a) Solve for the optimal x1 and x2 as a function of p1 and m.
(b) Solve for Moe's indirect utility (his maximized utility as a function of p1
and m).
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