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?

Expert Solution

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Rahul Sunny answered 7 months ago

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