Economics Homework Help

Question 1

Suppose a consumer’s utility function is given by ( . The price of good
1
,
2
) =
1
·
2
2 is given by and income .
2 = 1 = 12
– Find the optimal bundle that maximizes the consumer’s utility in three different
price situations
– Price of good 1:
1 = 4
– Price of good 1:
1 = 3
– Price of good 1:
1 = 1
– Plot the optimal bundles in the three cases found above to obtain the price offer
curve (set good 1 on the x-axis and good 2 on the y-axis)