Suppose a consumer's preferences over commodities 1 and 2 can be represented by the utility function , where . The prices of the two commodities are 1 and 2 respectively and the consumer's income is 150.
If the income of the consumer increases by 1 unit, then
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Suppose a consumer's preferences over commodities 1 and 2 can be represented by the utility function U(x₁, x₂) = min {x₁, x₂}, where x₁, x₂ ≥ 0. The prices of the two commodities are 1 and 2 respectively and the consumer's income is 150. If the income of the consumer increases by 1 unit, then (A) the optimum consumption of commodity 1 increases by 1/3 and the optimum consumption of commodity 2 increases by 1/3 (B) the optimum consumption of commodity 1 increases by 1/3 and the optimum consumption of commodity 2 increases by 2/3 (C) the optimum consumption of commodity 1 increases by 1/2 and the optimum consumption of commodity 2 increases by 1/2 (D) None of the above
Also written as: Suppose a consumer's preferences over commodities 1 and 2 can be represented by the utility function U(x_1, x_2) = min {x_1, x_2}, where x_1, x_2 >= 0. The prices of the two commodities are 1 and 2 respectively and the consumer's income is 150. If the income of the consumer increases by 1 unit, then
Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.
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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Question from the JNU SSS 2012 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.