There are two goods.You know how much a consumer can pay for good 1 if she spends
Question:
There are two goods. You know how much a consumer can pay for good 1 if she spends all of her income on good 1. If you knew the relationship of the prices of the two goods, then you could draw the consumer's budget line without further information. Explain
b. A consumer prefers more to less of each good. His income increases and the price of one of the goods falls while other prices remain constant. These changes must have made her better. Discuss
C. Mark strongly prefers consumption bundle A to consumption bundle B and weakly prefers bundle B to bundle A. These preferences can be represented by a utility function.Explain
d. Janet consumes x1 and x2 together in fixed proportions. She always consumes 2 units of x1 for every unit x2. A utility function that describes your preferences is U(x1, x2) =min{x1, 2x2}.
Expert Answer:
b If a consumer prefers more to less of each good an increase in income and a decrease in the price of one of the goods while other prices remain constant will make the consumer better off Heres why I... View the full answer
