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Question : Use the space below and the back to write out : 6610

Use the space below and the back to write out and clearly indicate your answers. Crystal has preferences over Good 1 and Good 2 given by u(x_1, x_2) = x_1 + 2 Squareroot x_2. Suppose that P_1 = $2, P_2 = $1, and that Crystal has $12 to spend. Compute her optimal consumption bundle. Now suppose that the prices are the same as before (P_1 = $2, P_2 = $1), but Crystal only has $3 to spend. What is her optimal bundle? Show your work and explain your results.

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Solution
5 (1 Ratings )

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