Question: 4-) Suppose that the utility function is characterized as: U(x1,x2)=x1+lnx2 a-) Find the optimal demands for good 1 and good 2 as a function of

4-) Suppose that the utility function is characterized as: U(x1,x2)=x1+lnx2 a-)

4-) Suppose that the utility function is characterized as: U(x1,x2)=x1+lnx2 a-) Find the optimal demands for good 1 and good 2 as a function of prices and income. b-) According to the above preferences, draw the Income Offer Curve that shows optimal bundle for different income levels. Then, find the corresponding Engel Curve for x2. Explain why you obtain these particular shapes. c-) Consider initially that Income (I) =$120,P1=$12 and P2=$2. Find the initial consumption levels for good 1 and good 2. d-) Suppose that P2 rises to $6. Find the substitution effect, income effect and total effect on good 2. Explain the steps carefully and support your result with an explanation and a graph. 4-) Suppose that the utility function is characterized as: U(x1,x2)=x1+lnx2 a-) Find the optimal demands for good 1 and good 2 as a function of prices and income. b-) According to the above preferences, draw the Income Offer Curve that shows optimal bundle for different income levels. Then, find the corresponding Engel Curve for x2. Explain why you obtain these particular shapes. c-) Consider initially that Income (I) =$120,P1=$12 and P2=$2. Find the initial consumption levels for good 1 and good 2. d-) Suppose that P2 rises to $6. Find the substitution effect, income effect and total effect on good 2. Explain the steps carefully and support your result with an explanation and a graph

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