1. (16 points) iNith some services, e.g., checking accounts, phone service, or pay TV, a consumer is offered a choice between two or more payment plans. One can either pay a high entry fee and get a low price per unit of service or pay a low entry fee and a high price per unit of service. Suppose you have an income of $1000. There are two plans. PlanA has an entry fee of $20 with a price of $10 per unit. Plan B has an entry fee of $40 with a price of $5 per unit for using the service. Let X; be expenditure on other goods and X1 be consumption of the 1 service. Your utility fLu1ction is given by u . x1, x2: = 100 X5412 a. Write down the budget equation that you would have after you paid the entry fee for each of the two plans. b. Would your consumption of the service increase proportionately with income? In other words, are your preferences hornothetic? Justify your answer. c. How much service would you choose in each case? How much would you spend on other goods? d. W'hich plan would you prefer? Explain