A consumer likes to always consume 1 unit of X, per unit of X,. Let P = price of good X, and P, = price of good X,
A) Write out a utility function that exactly describes these preferences.
B) What types of preferences are represented by this utility function?
C) Plot a set of indifferences curves that represent these preferences.
D) Given P₁ = price of good 1; P₂ = price of good 2; and M = income, derive the demand functions for X₁, and X₂
E) Calculate x₁* x₂* and U*(.) when Px=$2, Py=$4 and M=$80