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Suppose that you have five consumption choices: good x 1 c d o t s x 5 . An indifference surface is the set of

Suppose that you have five consumption choices: good x1cdotsx5. An indifference surface is the set of consumption choices with a CONSTANT utility. For example if
(x1,cdots,x5)=(2,1,1,1,1) gives the same utility as (x1,cdots,x5)=(1,1,1,1,2) than these are both points on the same indifference surface. An indifference map is the set of all
indifference surface for EVERY given utility.
Consider the following utility map:
U=i=15ln(xi-ai)
Where (a1,cdots,a5)=(5,5,7,4,4)
The budget constraint gives the set of possible consumption choices with a given income. If you have an income of $530 and the price of good xi is given by pi. The equation for the
budget line is given by: 530=i=15pixi.
A utility maximizing combination of goods x1cdotsx5 occurs when the surface given by the budget constraint is tangent to an indifference surface.
Find x1 as a function of p1cdotsp5
x1=
(Use p 1 for p1 and likewise for p2,p3,p4,p5.
The easiest way to solve this question is using Lagrange multiplier.
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