Asked by
Sakariye barkhad
on Dec 01, 2024
Verified
Katie Kwasi's utility function is U(x1, x2) = 5(ln x1) + x2.Given her current income and the current relative prices, she consumes 10 units of x1 and 15 units of x2.If her income doubles, while prices stay constant, how many units of x1 will she consume after the change in income?
A) 10
B) 15
C) 5
D) 20
E) There is not enough information to determine how many.
Utility Function
A mathematical representation of how different combinations of goods or services generate levels of happiness or satisfaction for a consumer.
Income
The money received by an individual or entity, typically on a regular basis, for work or through investments.
Consumption
The use of goods and services by households or individuals, leading to the reduction of their life span or value.
- Ascertain and describe the impact of changes in income and pricing on the demand from consumers.
- Understand homothetic preferences and their implications for consumer behavior across different income levels.
Verified Answer
PP
Learning Objectives
- Ascertain and describe the impact of changes in income and pricing on the demand from consumers.
- Understand homothetic preferences and their implications for consumer behavior across different income levels.