4. An agent consumes quantity (x1,x2) of goods 1 and 2. Here is his utility function:
?(?1, ?2) = √?1 + 2 ∗ ?2, his budget constraint is p1x1+p2x2 = m.
a. Calculate the agent’s Marshallian demand (x∗1 , x∗ 2).
b. When would the agent’s consumer’s problem have a corner solution?
5. An agent consumes quantity (x1,x2) of goods 1 and 2. Here is his utility function: ?(?1, ?2) = 2 ∗ ?1 ∗ ?2 + 1, ?1 = ?2 = $1, ℎ?? ?????? ? = 20.
(a) Calculate the agent’s Marshallian demand (x∗1, x∗2)
(b) If the government put a $1 tax on x1, which increase p1 to $2, assume p2 and m do not change, what is the demand for x1?
(c) If the government collect tax on the agent’s income, the amount of tax is the same as the tax revenue collected in (b), what is the agent’s utility? Compare it with the agent’s utility in (b).
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