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Microeconomics: Deriving demand function from utility functions with only one price?
Hilary has $100 to spend. Her utility function is U(x1,x2)=min{x1, 2x2}. The price of good 2 is p2=2. Sketch Hilary's demand curve for good x1.
I already have the answer to the equation and what the graph looks like, but I'm unsure of how you get these answers. I'm confused about finding the demand for x1 when you only have the price of x2. Can someone help me on this?
TIA
1 Answer
- Anonymous7 years agoFavorite Answer
It's a case of complementary goods.Hillary will consume x1 and 2x2 no matter what. There is no optimization. The consumption pattern will go from the origin upward with consistent combination.