Question: Ava's utility function for goods 1 and 2 is given by U(x1 ,x2 ) = min(4x1 , x2 ), where x1 and x2 are the

Ava's utility function for goods 1 and 2 is given by U(x1 ,x2 ) = min(4x1 , x2 ), where x1 and x2 are the quantities she consumes of good 1 and good 2, respectively. She has an income equal to m. The per unit price of good 1 is p1 and p2 is the per unit price of good 2.

a. How much utility does Ava derive from consuming 4 units of good 1 and 1 unit of good 2? How much utility does she derive from consuming 1 unit of good 1 and 4 units of good 2? On a set of axes with the units of good 1 on the x-axis and the units of good 2 on the y-axis, draw indifference curves that represent the set of consumption bundles that give Ava the same utility as each of the two

b. Derive an expression for the number of units of good 1 that Ava consumes as a function of p1, p2, and m. Do the same for her consumption of good 2. How many units of each will she consume when her income is equal to 15 and p1 = p2 = 1?

c. What would happen to Ava's consumption of each good if the price of good 2 were to fall to p2 = 1/2, with p1 and m remaining the same as in part b)?

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