Question 1 Consider an economy with two goods t = 1, 2. Whenever an individual consumes r1 units of good 1 and 12 units of good 2, their utility is given by u(1, 12) = alnx1 + Inx2, where o > 0 is a free parameter. (i) How does the parameter o affect the marginal rate of substitution between goods 1 and 2? Explain intuitively how does the relative preference for goods 1 and 2 change as the parameter o increases