Question: Bob has the utility function u ( x 1 , x 2 ) = 1 0 x 1 1 2 + 2 x 2 .

Bob has the utility function u(x1,x2)=10x112+2x2. Let p1=5 and p2=10 per unit.
a1(?MU?(()()1)) with x1on the horizontal axis
and for some arbitrary positive value ofx2. What is the sign of?MU?(()()1) and what is
the economic interpretation? What happens to?MU?(()()1)asx1 increases and what is the
economic interpretation?
b2(?MU?(()()2)) with x2on the horizontal axis. What is the
sign of?MU?(()()2) and what is the economic interpretation? What happens to?MU?(()()2)asx2
increases, else constant?
c1((?MU?(())1p1))to the
marginal utility of good 2 per dollar spent on that good ((?MU?(())2p2)). For what values
ofx1we have ?MU?(())1p1?M>U?(())2p2? What condition must be satisfied for ?MU?(())1p1
?MU?(())2p2?
dm>0?Isit possible that Bob
buys zero units of good 2 when m>0? Explain your answers using your results from
part c above.
em=100. Find his utility
maximizing bundle when his income ism=150.
Bob has the utility function u ( x 1 , x 2 ) = 1

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