Question

An agent consumes quantity (x1; x2) of goods 1 and 2. She has utility The agent faces prices p1 = 1 and p2 = 1 and has income m. [Hint: you may find it useful to plot the indifference curves]. a. Suppose m = 10. Solve for the agent’s optimal choice. b. Suppose m = 30. Solve for the agent’s optimal choice.

Answer 1

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