how are you able to have cases income >price ratio A consumer has preferences over two goods represented by the utility function u(x₁, x₂) =x1 + 2√√x₂.(a) Sketch this consumer's indifference curves.Solution: The indifference curves are conver, and are horizontal translations of eachother.(b) Find the Marshallian demand function x(p, w).Solution: The first-order conditions have a solution with x₁, x2 ≥ 0 if w≥ B. Whenw < we get a corner solution. Putting these together givesP2x(p, w) =(= - = ( ² )²³) if w ≥(0, 2)P2otherwise.Since preferences are conver, the solution to the first-order conditions is indeed a maxi-mum.(c) Sketch the wealth expansion path; that is, fixing prices p, sketch the demands x(p, w) in(21, 22)-space as wealth w varies.Solution: Starting from the origin, the path moves up along the vertical axis to thepointthen continues along the horizontal line x2 = P22+ (0₁ (2) ²), i

Given information U=X1+2X2Price of good 1=P1Price of good 2=P2Income=WBudget line=X1*P1+X2*P2

A consumer has preferences over two goods represented by the utility function u(21, X2) = ₁ + 2√₂. (a) Sketch this consumer's indifference curves. Solution: The indifference curves are convex, and are horizontal translations of each other. (b) Find the Marshallian demand function x(p, w). P2 Solution: The first-order conditions have a solution with x1, x2 ≥ 0 if w ≥ . When w< B we get a corner solution. Putting these together gives

A consumer has preferences over two goods represented by the utility function u(21, X2) = ₁ + 2√₂. (a) Sketch this consumer's indifference curves. Solution: The indifference curves are convex, and are horizontal translations of each other. (b) Find the Marshallian demand function x(p, w). P2 Solution: The first-order conditions have a solution with x1, x2 ≥ 0 if w ≥ . When w< B we get a corner solution. Putting these together gives

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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