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Find Olivia's optimal consumption bundle (x* ,y* ) associated with the following utility functions. Her income is I, and the prices of good x and y are respectively p and 1. Moreover, the goods must be nonnegative.
a. Her utility function is u(x,y) =xy/(x+y) subject to px + y ≤ I, x ≥ 0, y ≥ 0. Make sure you are clear about how to apply the Lagrangian method.
b. Her utility function is u(x, y) =x + xy, subject to px + y ≤ I, x ≥ 0, y ≥ 0. Hint: there are corner solutions to this problem.
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Normal 0 false false false EN-US X-NONE X-NONE Two of the economic benefit..
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