= - 4. (25 pts) Consider an economy whose income is w = 1 and has a preference relation given by the utility function u(

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4 25 Pts Consider An Economy Whose Income Is W 1 And Has A Preference Relation Given By The Utility Function U 1 (100.06 KiB) Viewed 34 times

= - 4. (25 pts) Consider an economy whose income is w = 1 and has a preference relation given by the utility function u(x,y) = Vx+vy. The price of good X and Y are p and 1 respectively (where p > 0). Goods cannot be consumed in negative quantities. (i) (4 pts) Write down the utility maximisation problem of the consumer. (ii) (8 pts) Explain intuitively how you would obtain a solution to the above utility function. Draw a diagram. (iii) (10 pts) Ignore the non-negativity constraints for now. Find all the critical points and check if the sufficient conditions for a maximum are met. (iv) (3 Pts) Is the optimum you found in (iii) a global maxima?