Suppose the representative consumer has the (quasilinear) utility function: U(x. y) = ax + In()) where x,y are consumption goods. Denominated in US dollars, the prices of x and y and pz, respectively. (a) What does the term quasilinear mean? Is consumption of x independent of y? (b) Assume the consumer has a budget of C dollars at his/her disposal. What is the maximum utility the consumer may achieve with this budget? (c) What is the minimum expenditure if the consumer wants to derive U,units of utility?
Suppose the representative consumer has the (quasilinear) utility function: U(x. y) = ax + In()) where x,y are consumption goods. Denominated in US dollars, the prices of x and y and pz, respectively. (a) What does the term quasilinear mean? Is consumption of x independent of y? (b) Assume the consumer has a budget of C dollars at his/her disposal. What is the maximum utility the consumer may achieve with this budget? (c) What is the minimum expenditure if the consumer wants to derive U,units of utility?
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 2.5P
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