1. Suppose that Lexi preferences are given by the utility function u(x1; x2) = x12x2, where...

1. Suppose that Lexi preferences are given by the utility function u(x1; x2) = x₁²x₂, where x₁ denotes bottles of juice, and x₂ denotes the number of meat plates. A meat dish costs $15 on average, and bottle of juice is $3. You are told that at these prices Lexi can afford 10 meat plates and 40 bottles of juice per month.

i) Derive Lexi optimal consumption bundle.
ii) Which of the following two options would Lexi prefer? Show work.

Option (1): Additional $30 that Lexi can spend only on meat.

Option (2): $3 off of each meat plate ordered.

Expert Solution

Rahul Sunny answered 2 weeks ago

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