Question: (a) 3 6. (Utility Maximization Problem) Suppose the utility function is u(a1,72) = ja and the budget constraint is 3x2, + 4x2 = 100. (a)

(a)

3 6. (Utility Maximization Problem) Suppose the utility function is u(a1,72) = ja and the budget constraint is 3x2, + 4x2 = 100. (a) Write down the Lagrange function and first order conditions. (b) Solve the Mashallian demand function. (c) What is the value of the lagrange multiplier (shadow price) A? Explain its meaning. (d) (e) What is the consumer's indirect utility level? Suppose now the price for product 1 increases from 3 to 5. How will this change the demand for good 1, good 2, and the indirect utility? Explain why without solving the consumer problem again

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