5. Suppose the representative consumer has the (quasilinear) utility function: U(x, y) = ax + In(y)...

 

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5. Suppose the representative consumer has the (quasilinear) utility function: U(x, y) = ax + In(y) where x,y are consumption goods. Denominated in US dollars, the prices of x and y p₁ and pz, respectively. (a) What does the term quasilinear mean? Is consumption of x independent of y? (3 marks) (b) Assume the consumer has a budget of C dollars at his/her disposal. What is the maximum utility the consumer may achieve with this budget? (12 marks) (c) What is the minimum expenditure if the consumer wants to derive U units of utility? (15 marks) 5. Suppose the representative consumer has the (quasilinear) utility function: U(x, y) = ax + In(y) where x,y are consumption goods. Denominated in US dollars, the prices of x and y p₁ and pz, respectively. (a) What does the term quasilinear mean? Is consumption of x independent of y? (3 marks) (b) Assume the consumer has a budget of C dollars at his/her disposal. What is the maximum utility the consumer may achieve with this budget? (12 marks) (c) What is the minimum expenditure if the consumer wants to derive U units of utility? (15 marks)

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