Question

In: Economics

Suppose an agent has preferences represented by the utility function: U(x1, x2) =1/5 ln (x1) +...

Suppose an agent has preferences represented by the utility function:

U(x1, x2) =1/5 ln (x1) + 4/5 ln (x2)

The price of x1 is 6 and the price of x2 is 12, and income is 100.

a) What is the consumer’s optimal consumption bundle?

b) Suppose the price of x2 is now 4, what is the consumer’s new best feasible bundle?

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