A consumer has the following utility function: U(x1,x2)=(x1+5)(x2+2) Prices of the two goods x1
and x2 respectively are p1 and p2 and the consumer has income m. We assume that all prices
and income are strictly positive. Furthermore, throughout this question we assume that m is high
enough so that both goods are consumed in strictly positive amounts in equilibrium. 1) Solve the
consumer's optimization problem and express the demand for the two goods in terms of prices
and income. (i) Compute the missing values of elasticities in the following table assuming M=10,p1
=2, and p2=1..
A consumer has the following utility function Ux1x2x1+.pdf
1. A consumer has the following utility function: U(x1,x2)=(x1+5)(x2+2) Prices of the two goods x1
and x2 respectively are p1 and p2 and the consumer has income m. We assume that all prices
and income are strictly positive. Furthermore, throughout this question we assume that m is high
enough so that both goods are consumed in strictly positive amounts in equilibrium. 1) Solve the
consumer's optimization problem and express the demand for the two goods in terms of prices
and income. (i) Compute the missing values of elasticities in the following table assuming M=10,p1
=2, and p2=1.
