Y5

Aconsumer has a utility function ofthe form U(x1; x2) = $4/x1 + x2. We also know that the price ratio is gf = 4 and that the available budget is 10, so that hypothetically 10 units of x1 can be purchased. i. What does the utility function tell us about how utility changes with respect to increases in the consumption of these goods? ii. Use the Lagrange method to determine the values ofxl and x2 for which utility is maximised iii. Describe how changes in the price can affect utility