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Regardless of your answer to question 1, let ua = x+A+ 3x²A. (I am not claiming this is the correct answer to Q1!) What is he


Person A is fine with a 24 ounce soda or three 8 ounce sodas, in other words, her preferences are 3-to-1 perfect substitutes.
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Answer #1

Ua = X1A + 3X2A

Budget line = p1(X1A) + p2 X2A= m

In Case of Perfect Substitute, Consumer only consume one good.

Demand function for good 2 will be m / p2

Explanation : Consumer will consume only Good 2. This may be the case where p1 > p2. So consumer will consume only good 2 and none of good 1

Therefor X1A = 0

Putting value of Good 1 into Budget line will give :

p1(0) + p2 X2A = m

p2(X2A )= m

X2A = m / p2

  

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