Throughout this problem set, let X = R2, and suppose a consumer faces a pricevector p = (P1, P2) and has an income m, where p1, P2, m > 0.1. [This question gives an example in which the consumer does not have an optimalsolution.]Suppose (m, P1, P2) = (2, 1, 2) and u takes the formu(x) =x1 + x₂1-7if ₁ < 2if ₁ > 2.Show that:(a) If r = (2,0), then r is not optimal for the consumernative affordable bundle yields a strictly higher utility.(b) If x EX (p, m) is not equal to (2, 0), then à is not optimal for the consumer.Conclude that the consumer has no optimal consumption bundle in X (p, m).that is, some alter-

The utility of a bundle represents the satisfaction derived by a consumer from the consumption of…

Answered: Throughout this problem set, let X =…

Throughout this problem set, let X = R2, and suppose a consumer faces a price vector p= (P1, P2) and has an income m, where P₁, P2, m > 0.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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