Consider a consumer with a utility function on two goods, u(c), c2), and income I. Suppose that consumption prices are equal to (p1, p2). A) Suppose that the utility function is u(c1,c2) = c +c2. Characterize the solution. Finally, suppose that the utility function is u(c1, c2) = c - 0.5c2. Characterize the B) solution. A few sentences explanation should suffice.
Consider a consumer with a utility function on two goods, u(c), c2), and income I. Suppose that consumption prices are equal to (p1, p2). A) Suppose that the utility function is u(c1,c2) = c +c2. Characterize the solution. Finally, suppose that the utility function is u(c1, c2) = c - 0.5c2. Characterize the B) solution. A few sentences explanation should suffice.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.2P
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