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Suppose April has the following quasilinear utility function from soda x and other stuff M: U(x, M) = 10 x + M. The price per
Suppose April has the following quasilinear utility function from soda x and other stuff M: U(x, M) = 10 x + M. The price per unit of soda is $p, and the price of other stuff is $2 per unit. April has an income of Y = 100. Assume that soda is a continuous good.
Assuming an interior solution, show that April's optimal quantity of x is x = 100 p2 . Explain why p must be great than 2 for the optimum to be interior
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Heres why Aprils optimal quantity of soda x is x 100p2 and why p must be greater than 2 for an interior solution 1 Budget Constraint April has a limit...Get Instant Access to Expert-Tailored Solutions
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