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Consider an agent with preferences over X = Rn representable by the quasilinear utility + function U(x)=(min{x1/1,...,xn1/n1})k +xn for some constants k,1,...,n1 > 0. Prices
Consider an agent with preferences over X = Rn representable by the quasilinear utility + function U(x)=(min{x1/1,...,xn1/n1})k +xn for some constants k,1,...,n1 > 0. Prices are linear, and the outside good (n) is a nu- meraire. The agent has wealth w > 0. 1. Suppose that the agent allocates a portion w [0, w] of her wealth to consuming inside goods (1 through n 1) and spends her remaining wealth w w on the outside good. Find her optimal consumption of inside goods given this wealth allocation. Calculate the utility achieved by this consumption bundle
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