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Consider the following problem. U(a,b) = a^2 + b. The price of good a is Pa=1 and the price of good b is Pb=1 The person has income of 100 to spend on a and b Note when fixing b here this utility

Consider the following problem.
U(a,b) = a^2 + b. The price of good a is Pa=1 and the price of good b is Pb=1. The person has income of 100 to spend on a and b.
(Note: when fixing b here, this utility function exhibits increasing marginal utility on good a.)
Question: What is the optimal consumption bundle (a*,b*)? What can you say about this utility function?

May 02 2020 View more View Less

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