7.5. A consumer has a direct utility function of the form U(x₁, x₂) = u(x₁) + x₂. Good 1 is a discrete good; the only possible levels of consumption of good 1 are ₁ = 0 and ₁ = 1. For convenience, assume that u(0) = 0 and p2 = 1. (a) What kind of preferences does this consumer have? (b) The consumer will definitely choose x₁ = 1 if p₁ is strictly less than what? (c) What is the algebraic form of the indirect utility function associated with this direct utility function?
7.5. A consumer has a direct utility function of the form U(x₁, x₂) = u(x₁) + x₂. Good 1 is a discrete good; the only possible levels of consumption of good 1 are ₁ = 0 and ₁ = 1. For convenience, assume that u(0) = 0 and p2 = 1. (a) What kind of preferences does this consumer have? (b) The consumer will definitely choose x₁ = 1 if p₁ is strictly less than what? (c) What is the algebraic form of the indirect utility function associated with this direct utility function?
Algebra & Trigonometry with Analytic Geometry
13th Edition
ISBN:9781133382119
Author:Swokowski
Publisher:Swokowski
Chapter7: Analytic Trigonometry
Section7.6: The Inverse Trigonometric Functions
Problem 93E
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