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. Which of the following is true?
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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} + max {x1, x2}, where x1, x2 ≥ 0. The prices of the two commodities are 1 and 2 respectively and the consumer’s income is 150. Which of the following is true? (A) At the optimum, the consumer should consume 150 units of commodity 1 and none of commodity 2 (B) At the optimum, the consumer should consume 75 units of commodity 2 and none of commodity 1 (C) At the optimum, the consumer should consume 50 units of commodity 1 and 50 units of commodity 2 (D) At the optimum, the consumer should spend equal amounts on the two commodities
Also written as: Suppose a consumer’s preferences over commodities 1 and 2 can be represented by the utility function U(x1, x2) = min {x1, x2} + max {x1, x2}, where x1, x2 >= 0. The prices of the two commodities are 1 and 2 respectively and the consumer’s income is 150. Which of the following is true?
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 2015 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.