How many individual units would be purchased

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Reference no: EM133750122

Problem

Assume a consumer has income m and maximizes utility from two goods r, and 12 which are available at p, and p., respectively. In addition to individual units of these goods, however, packages containing one unit of r, and one unit of r, are also available for a price po for the package. Assume that goods and packages of goods can be purchased in fractional amounts if desired. (1) Prices po, p, and p2 must satisfy P. < P1 + P2, P> > p, and p; > P2, for any consumer to simultaneously purchase a package and individual units of r, and $2. Given income m, write down the budget set of the consumer. (2) Set this problem up as utility maximization, and then list the Kuhn-Tucker conditions. (3) Solve for m - 30, p1 = 2, p2 = 2 and po = 3 for a consumer with utility u(11, 12) = 1 15. Indicate how many packages and how many individual units would be purchased.

Reference no: EM133750122

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