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Questions › DSE › DSE 2006 › Q42
2 marksMicroeconomics › Budget constraint and consumer equilibrium › Demand under complements, substitutes and quasilinear utilityHardabout 3 min

DSE 2006 Question 42: Budget constraint and consumer equilibrium

Suppose Asha's preferences between two commodities x1x_1x1​ and x2x_2x2​ can be represented by u(x1,x2)=min⁡{x1−5, x2+3}u(x_1,x_2)=\min\{x_1-5,\,x_2+3\}u(x1​,x2​)=min{x1​−5,x2​+3}. Given an income of Rs. 737373, and facing prices of Rs. 333 for x1x_1x1​ and Rs. 444 for x2x_2x2​, Asha's optimal consumption bundle of (x1,x2)(x_1,x_2)(x1​,x2​) will be

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Suppose Asha's preferences between two commodities x₁ and x₂ can be represented by u(x₁,x₂)=min {x₁-5, x₂+3}. Given an income of Rs. 73, and facing prices of Rs. 3 for x₁ and Rs. 4 for x₂, Asha's optimal consumption bundle of (x₁,x₂) will be (A) (12.5,4.5) (B) (10.42,10.42) (C) (15,7) (D) (3,16)

Also written as: Suppose Asha's preferences between two commodities x_1 and x_2 can be represented by u(x_1,x_2)=min {x_1-5, x_2+3}. Given an income of Rs. 73, and facing prices of Rs. 3 for x_1 and Rs. 4 for x_2, Asha's optimal consumption bundle of (x_1,x_2) will be

Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.

What this question tests

This question is on Demand under complements, substitutes and quasilinear utility, part of Budget constraint and consumer equilibrium in Microeconomics.

Deriving demand when preferences are L-shaped, linear or quasilinear, and what that implies for income and price responses.

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