Answer to Question #99883 in Microeconomics for indie

Question #99883
Let the utility function be given by
u(x1, x2) = √x1 + x2.
Let m be the income of the consumer, p1 and p2 the prices of good 1 and good 2, respectively.
To simplify, normalize the price of good 1, that is p1 = £1.
(a) Write down the budget constraint and illustrate the set of feasible bundles using
a figure.
1
Expert's answer
2019-12-05T09:39:27-0500

(a) The budget constraint is a line, which shows all possible combinations of consumption of goods x1 and x2.

Its equation is:

p1x1 + p2x2 = m,

if p1 = £1, then: x1 = m - p2x2.


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