Question: Suppose that a consumer has a choice between gallon jugs of milk and half-gallon jugs of milk. The consumer only cares about how much milk
a. Write a utility function for this consumer.
b. Suppose the price of a half-gallon jug of milk is $2, the price of a gallon jug of milk is $5, and the consumer has $10 to spend on milk. Set up a Lagrangian and derive the first order conditions for the maximization problem.
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a The utility function for perfect substitutes is often tricky If the consumer only cares about how ... View full answer
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