Budget constraint: P₁c₁ + P₂(1+ )c₂ = Y

Optimality condition: P₁/P₂(1+ ) = (c₁/c₂)^-1/p

a) Solve for the household's consumption demand functions for c1^* and c2^*.

b) Using your answers from part (d), perform comparative static analysis to mathematically show how an increase in the transaction cost causes the optimal values of c1* and c2^* to change.