Suppose an agent has preferences represented by the following utility function: u(x1, x2) = 1/4 ln(x1)...

Suppose an agent has preferences represented by the following utility function: u(x1, x2) = 1/4 ln(x1) + 3/4 ln(x2) The price of good x1 is 2, the price of good x2 is 6, and income is 40.

a) What is the consumers best feasible bundle (ie, his optimal consumption bundle)?

b) Interpret the consumer’s marginal rate of substitution at the best feasible bundle found in part a).

Expert Solution

Rahul Sunny answered 2 years ago

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