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Can you write down the steps, and please help me to solve these two questions. Thanks a lot! Question 1 Maximise a = ofe,
Can you write down the steps, and please help me to solve these two questions. Thanks a lot!
Question 1 Maximise a = ofe, " subject to the budget constraint: Y = Pic, + Prez. Show that at the optimum, the marginal rate of substitution between c and cz equals the price ratio. Question 2 Repeat the exercise in Question 3, but assume that there is tax on good 2. such that the budget constraint is: Y = Pic, + (1 + ()Pyc,. Show how this will affect the optimal choice between the two goods. Question 3 Another commonly used concept in macroeconomics is the elasticity of substitution which measures how easy it is to substitute between two goods. Given the formula for the elasticity of substitution: d In(c2/ ci) e1.2 d In MRS where MRS is the marginal rate of substitution. Use the utility function in question 3 to work out the elasticity of substitutionStep by Step Solution
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