Math Solutions

(See Steps) A consumer's preferences over two goods are described by the following utility function: u(x_1, x_2)=x_2+ln x_1 where x_1 is the amount of good

Question: A consumer's preferences over two goods are described by the following utility function:

\[u\left(x_{1}, x_{2}\right)=x_{2}+\ln x_{1}\]

where \(x_{1}\) is the amount of good 1, and \(x_{2}\) is the amount of good 2. Suppose he has $5 available, and wishes to choose the best affordable bundle \(\left(x_{1}, x_{2}\right)\), where \(x_{1}, x_{2}\) can be any non-negative numbers:

  1. Explain why it can never be optimal to choose a pair \(\left(x_{1}, x_{2}\right)\) with \(x_{1}+x_{2}<5\).
  2. Find the optimal bundle.

Price: $2.99
Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document


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