Use the Cobb-Douglas utility function and budget constraint below to answer questions that follow. u(x1, x2) =x1^α x2^(1-α) m =p1 x1 p2 x2(a) Diagram the consumer's optimal choice of x1 and x2. Suppose the consumer's income increases, diagram their new optimal choice and then diagram their income offer curve.(b) Diagram the consumer's Engel curve for good 1.(c) Suppose there is a change in the price of good 1 from p1 to p1^', where p1^'<p1. Diagram the consumer's initial optima
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Use the Cobb-Douglas utility function and budget constraint below to answer questions that follow. u(x1, x2) =x1^α x2^(1-α) m =p1 x1 p2 x2(a) Diagram the consumer's optimal choice
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