Consider the consumer whose utility function is given by u(x,x) = In(x1)+x2. Derive the demand for...

 

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Consider the consumer whose utility function is given by u(x₁,x₂) = In(x1)+x2. Derive the demand for X₁ and x2 when the prices are p₁ and p2, and the income of this consumer is I. Then, using the figure in the next page, draw how the consumption of x₁ depend on income I, when P₁ = P2 = 0.2 (Your answer should be consistent with Problem 6.) Also in the light of your solution, for what kind of goods consumers (we) are likely to have preference that is captured by quasi-linear utility functions? x(0.2,0.2,1) 10 9 8 7 6 5 4 en 2 1 0 0 1 2 3 5 6 7 8 9 10 Income I Consider the consumer whose utility function is given by u(x₁,x₂) = In(x1)+x2. Derive the demand for X₁ and x2 when the prices are p₁ and p2, and the income of this consumer is I. Then, using the figure in the next page, draw how the consumption of x₁ depend on income I, when P₁ = P2 = 0.2 (Your answer should be consistent with Problem 6.) Also in the light of your solution, for what kind of goods consumers (we) are likely to have preference that is captured by quasi-linear utility functions? x(0.2,0.2,1) 10 9 8 7 6 5 4 en 2 1 0 0 1 2 3 5 6 7 8 9 10 Income I

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Given the utility function ux1x2 x1ax2b Given price p1 and p2 Marginal Utility of Good X1MUx1 Deriva... View the full answer