Andrew's Utility Function Is U(x₁, X₂)=4x²₁ + X₂

question 14

Multiple Choice

Andrew's utility function is U(x₁, x₂) =4x²₁ + x₂.Andrew's income is $32, the price of good 1 is $16 per unit, and the price of good 2 is $1 per unit.What happens if Andrew's income increases to $80 and prices do not change? (Hint: Does he have convex preferences?)

• A)He will consume 48 more units of good 2 and the same number of units of good 1 as before.
• B)He will increase his consumption of both goods.
• C)He will reduce his consumption of good 2.
• D)He will consume the same number of units of good 2 and 3 more units of good 1 as before.
• E)None of the above.

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Definitions:

Bath Sponges

Natural or synthetic sponges used for cleansing the body; natural ones are harvested from the ocean and belong to a simple, multicellular organism group.

Silica

A hard, unreactive, colorless compound that occurs as the mineral quartz and as a principal constituent of sandstone and other rocks.

Calcium Carbonate

A chemical compound used as a dietary supplement or antacid; it's also the main component of limestone.

Spongin

A fibrous protein that makes up the skeleton of many sponges.