Nigella has the following utility function over two goods (x1, x2): U(x1, x2) = min {0.5x1,...

Nigella has the following utility function over two goods (x1, x2):

U(x1, x2) = min {0.5x1, 3x2}

a.What is the Nigella’s utility level if x1= 20 andx2= 3?

b.Suppose P1= 1 andP2= 3(where P1is the price x1andP2is theprice of x2) and Nigella has an income of 18. What is Nigella’s budget constraint? Illustrate it in a graph

c.Solve for the Nigella’s utility maximizing bundle of x1andx2.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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