Question: Please answer the question below with detailed explanation. Question 2 (20 points) : Suppose you have the following utility function for two goods: u(21, X2)

Please answer the question below with detailed explanation.

Question 2 (20 points) : Suppose you have the following utility function for two goods: u(21, X2) = 21 12 . Suppose your initial income is I, and prices are p1 and p2. (a) Suppose I = 400, p1 = 2.5, and p2 = 5. Solve for the optimal bundle. Graph the budget constraint with 21 on the horizontal axis, and the indifference curve for that bundle. Label all relevant points. 2 (b) Suppose I = 600, p1 = 2.5, and p2 = 4. Solve for the optimal bundle. Graph the budget constraint with x1 on the horizontal axis, and the indifference curve for that bundle. Label all relevant points

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