Construct and sketch consumer budget constraint

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Question

Let a consumer have preferences described by the utility function U = log(x1) + log(x2), and an endowment of 2 units of good 1 and 2 units of good 2.

1. Construct and sketch the consumer's budget constraint. Show what happens when the price of good 1 increase.

2. By maximizing utility, determine the consumer's demands.

3. What effect does increasing the endowment of good 1 have on the demand for good 2?

Reference no: EM133311713

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