Question: Consider a consumer with a utility functionu(x1, x2) = max{x1, x2}. The consumer faces pricesp1andp2for goods 1 and 2, respectively, and has an income ofmdollars

  1. Consider a consumer with a utility functionu(x1, x2) = max{x1, x2}. The consumer faces pricesp1andp2for goods 1 and 2, respectively, and has an income ofmdollars (assume throughoutp1=p2).

(a)Find the optimal levels of consumption for goods 1 and 2 as a function of income and prices.

(b)Is good 1 a normal good?

(c)Are goods 1 and 2 complements or substitutes?

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