Question

David consumes two things: gasoline (91) and bread (92). David's utility function is U(91, 92) = 109,0-220.8

Answer 1

David consmes two things! gasoline (41) and bread (22). David's utility function ist ULR1, 9x) = 102,022,0.8 Price of gasoline = pi and price of bread = P. and in come=Y Now David's budget constraint y = piqit P292 Now U(21,22) = 109,0129 0.8 Now, wai ~4 1 2 , міл - 2 non-au (2), 24) ALI = 1060.2727 02.018 = 221-0.892018 and marginal utility of ar, mU2 = dur 2q2 = 10 (0.879,0222012 = 82,0.2q2 0.2 Now, utility manimising condition will be mous => 29,-0.82.0.8 P 1. 8 20.22, 2012 =) P2q2 = 491 P, 22= 421 P1 Now, substituting y => y => y q2 = 491 P1 in the budget constraint weget? = p. 21+ P2q2 = pi q1 + P2 (421/1) = Piqet 4P12, => M = 5912, => Array =21 curve for gaso line (91) q = Hace demand - Scanned with CamScanner

the el Now gasoline Conhpoll on the effect of in nease in the puce of on the consumption of gasoline will be: the puce of gasoline , - q1 = y la -> se = - for gasoline in neases, Druid's demand Hince as the pice of gasoline decreases income on the effect on a David's Now to get the effect of a change in of a change in the price of gasoline consmption Now gal y = - en aan Thas as income increases, Dawid's response to a change in the price of gasoline on his demand for gasoline becomes negative Scanned with CamScanner