Let the utility function be given by
u(x1, x2) = √x1 + x2.
Let m be the income of the consumer, P1 and P2 the prices of good 1
and good 2, respectively.
To simplify, normalize the price of good 1, that is P1 = £1.
(a) Write down the budget constraint and illustrate the set of
feasible bundles using a figure.
(b) Suppose that m = £100 and that P2 = £10. Find the optimal
bundle for the consumer....