(a) What kind of preferences do you have if your utility function is u (x1; x2)...

(a) What kind of preferences do you have if your utility function is u (x1; x2) = 13x1 + 13x2?

(b) If you are maximizing utility and the price of x1 is less than the price of x2, what fraction of your income do you spend on each good? Explain your answer.

(c) Now say that your utility function is instead ln (13x1 + 13x2). If you are maximizing utility and the price of x1 is less than the price of x2, what fraction of your income do you spend on each good? Explain your answe

Expert Solution

Part(a) he has a perfect substitute preference means x and y gives him same level of utility. Whether he consume x or y utility is same.

Par(b) and part(c) are in uploads

Rahul Sunny answered 2 years ago

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