Question: Carlos's utility function is u ( a , b ) = a + 2 b , where a is his consumption of artichokes and b
Carlos's utility function is
uabab
where a is his consumption of artichokes and b is his consumption of broccoli.
Laura's utility function is
uabminab
Laura initially has artichokes and no broccoli. Carlos initially has broccoli and no artichokes Let ac be Carlos's consumption of artichokes and let bc be his consumption of broccoli. Let artichokes be the numeraire, and let the price of broccoli be pAt competitive equilibrium, Carlos's consumption will have to satisfy the budget constraint
ac bc p
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
