Jezz Has the Quasi Log-Linear Utility Function

question 24

Essay

Jezz has the quasi log-linear utility function
U(q₁,q₂)= q₁ + 2ln(q₂)
Jezz has an income of $100 and faces prices p₁ = p₂ = 20.
a.What is the marginal rate of substitution for this utility function?
b.Solve for Jezz's optimal bundle.
c.Suppose Jezz's income falls to $20.What will happen to his optimal bundle? Is the MRS=MRT at the optimal bundle?

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Definitions:

Cent

A unit of currency used in several nations, equivalent to 1/100th of a dollar, euro, or similar decimal-based currency.

Significant Figures

The digits of a number that are meaningful in terms of accuracy or precision, important in scientific and mathematical calculations.

Percent

A part or other object per hundred, used in mathematics to describe how one quantity relates to another in terms of proportion or fraction.

Accurate

Definition: Precisely correct or exact in details.