2. Consider a consumer with CES utility u(x1, x2) = x + x2- (a) Does this...

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2. Consider a consumer with CES utility u(x1, x2) = x + x2- (a) Does this consumer have preferences the "increasing difference prop- erty"? How about the strict increasing difference property? Make a detailed argument. (b) for the case that p = .5, show using the arguments on monotone com- parative statics in class that both goods are normal. (b) for the case that p = 2, show that the suffi cient conditions based upon the increasing difference property for normal demand for both goods would fail. 2. Consider a consumer with CES utility u(x1, x2) = x + x2- (a) Does this consumer have preferences the "increasing difference prop- erty"? How about the strict increasing difference property? Make a detailed argument. (b) for the case that p = .5, show using the arguments on monotone com- parative statics in class that both goods are normal. (b) for the case that p = 2, show that the suffi cient conditions based upon the increasing difference property for normal demand for both goods would fail.

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Analysis of CES Utility Function The given CES utility function is ux1 x2 x1 x212 Lets analyze its properties regarding preference relations a Increas... View the full answer