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I need help on 2e, 2f, 2g, 2h. Thank you her choice explain how and why and show with an indifference curve what is optimal
I need help on 2e, 2f, 2g, 2h. Thank you
her choice explain how and why and show with an indifference curve what is optimal choice looks like. 2. (34 points) A consumer's utility function is given by U = xx) + 10, where x, and x2 represent the consumptions of water (good 1) and soda (good 2). Suppose the prices of the two goods are $2 and $6 respectively. Suppose the consumer has income of $60. (a) (4 points) Write down the consumer's budget constraint and graph it. Put x, on the horizontal axis and x2 on the vertical axis. Label the intercepts. Derive the quantity of soda in terms of quantity of water this consumer will buy and find the slope of the budget line. (b) (4 points) Suppose during the pandemic, the store limits the quantity of water each customer can buy at 20, draw a new budget line for the consumer. Make sure you label the key elements. (c) (4 points) What is the marginal utility of x, and x2, and what is the marginal rate of substitution? (d) (6 points) Write down the consumer's utility maximization problem and solve it. (e) (8 points) What is this consumer's compensated demand elasticity for x,? What is the income elasticity for xz? (f) (2 points) Suppose the store further takes actions to stop stockpiling setting the limit of water at 10, how does it affect the consumer's choice? (g) (2 points) If there is a tax of $2 dollars on water, what is the tax revenue? (h) (4 points) What is the compensating variation for the consumer given the quantity taxStep by Step Solution
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