MicroEconomics
20 points) Katie, a consumer with a fixed income (m), only consumes burgers and pickled cucumbers (x1 and x2) and firmly believes that they should be consumed in fixed proportions: two burgers with three pickled cucumbers.
(a) Find the utility function that represent Katie’s preferences. Are they homothetic? Explain. 5 points
(b) Write and solve the consumers utility-maximization problem to find her demand functions, x1(p1, p2, m) and x2(p1, p2, m).
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Order Paper Now(c) Using your previous results, try replacing the x1 and x2 in the Utility function by the demand functions x1(p1, p2, m) and x2(p1, p2, m). This creates a new ”indirect utility function” that is a function of only prices and income, v(p1, p2, m).
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