Question

Start with an arbitrary utility function u(x1,x2) that is differentiable. Let v(u) be a monotonic transformation of u
a) Solve: max u(x1,x2) ST : pix1P2x2 = m

b) Solve: max v(u(x1,x2)) ST pix1P2x2 = m

c) Discuss the relationship between these problems. What characteristics of the utility function is generating this result?

Answer 1

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