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As in PS1, consider a consumer with preferences over newspapers (x) and books (y) that can be represented by the quasilinear utility function U(x; y) = x + 2 p y. a. Solve for the consumer's demand functions for newspapers and books as a function of the price of newspapers (p x ), the price of books (p ) and her income M. b. Sketch the Engel curves for both newspapers and books. Be careful! (What is her demand y for both goods at very low levels of income?) c. In a few sentences describe in words how this consumer spends her income.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91229123

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