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Questions › IIT JAM › IIT JAM 2024 › Q54
2 marksMicroeconomics › Budget constraint and consumer equilibrium › Demand under complements, substitutes and quasilinear utilityHardabout 3 min

IIT JAM 2024 Question 54: Budget constraint and consumer equilibrium

A consumer has u(x1,x2)=(2x1−1)0.25(x2−4)0.75u(x_1, x_2) = (2x_1 - 1)^{0.25}(x_2 - 4)^{0.75}u(x1​,x2​)=(2x1​−1)0.25(x2​−4)0.75, budget 737373, and prices 222 and 111 for x1x_1x1​ and x2x_2x2​. The value of (x1+x2)(x_1 + x_2)(x1​+x2​) is ________ (rounded off to two decimal places).

Answer and worked solution

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Plain-text version

A consumer has u(x₁, x₂) = (2x₁ - 1)⁰·²⁵(x₂ - 4)⁰·⁷⁵, budget 73, and prices 2 and 1 for x₁ and x₂. The value of (x₁ + x₂) is (rounded off to two decimal places).

Also written as: A consumer has u(x_1, x_2) = (2x_1 - 1)^(0.25)(x_2 - 4)^(0.75), budget 73, and prices 2 and 1 for x_1 and x_2. The value of (x_1 + x_2) is (rounded off to two decimal places).

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.

TestStop has 23 past-paper questions on this subtopic; the nearest in year are below.

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