Question

The utility function of the consumer is u(x1,x2) = (10x1 + x2). a) Plot all the consumption bundles that gives the consumer utility 100. (3 points) b) Plot all the consumption bundles that gives the consumer utility 144. (3 points) c) Plot the budget constraint when p. = 10,P2 = 10 and m = 100 (3 points) d) Plot the budget constraint when P1 = 20, P2 = 5 and m = 60 (3 points) e) What is the optimal quantity demanded of x, and x2 when pı = 10,p2 = 10 and m = 100? (4 points) f) What is the optimal quantity demanded of Xi and X2 when P1 = 20,P2 = 5 and m = 60 ?(4 points)

Answer 1

2. a) U= (10x1+x2)2 4=100, Then N100 = 10X, 4X2 10=10x1 + X2 DATE: 1 PAGE: b) Joy 2 U= 144 then W 144 1oxi+ X2 loxi+ X 2=12 1 XIT B C₂ m=Pixit P2X2 100= lopi +10 P2 10 12 1 X2 d) 60 = 200, +5 P2 3 10 X MRS = aulax, 10 > P/ P2 = 1 au 12x2 80 МО/Р, 7 М02 | Po 80 only Good 1 is consumed Xi = mipi= 10 X2=0 of MRS= MUI/MU2 =10 > Pil P2 = 2015=4 only Good I is consumed XIV = M/ Pi = 3, xq'=o.