Douglas Cornfields preferences are represented by the utility function u(x 1 , x 2 ) The prices
Question:
Douglas Cornfield’s preferences are represented by the utility function u(x1, x2)
The prices of x1 and x2 are p1 and p2.
(a) The slope of Cornfield’s indifference curve at the point (x1, x2) is _____________.
(b) If Cornfield’s budget line is tangent to his indifference curve at (x1, x2), then p1x1 p2x2 _________. When he is consuming the best bundle he can afford, what fraction of his income does Douglas spend on x1? ________.
(c) Other members of Doug’s family have similar utility functions, but the exponents may be different, or their utilities may be multiplied by a positive constant. If a family member has a utility function U(x, y) = cxa1 xb 2 where a, b, and c are positive numbers, what fraction of his or her income will that family member spend on x1? _________.
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