Question: Problem 6 Optimal consumption choice, simple interior (17 points) This is a regular optimal consumption problem with Cobb-Douglas preference, which gurantee a nice interior solution.

a regular optimal consumption problem with Cobb-Douglas preference, which gurantee a nice

Problem 6 Optimal consumption choice, simple interior (17 points) This is a regular optimal consumption problem with Cobb-Douglas preference, which gurantee a nice interior solution. Let individual A's preferences over two-dimensional consumption bundles z R? be represented by the utility function, u(z) = z1z2. The agent faces prices p = (4,1). A has income level m = 16. Determine A's optimal consumption bundle. [Hint: Use the condition for an optimal interior demand choice, M RS(z*) = p1/p2, together with the equation for the budget line pz* = m.|

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