Assume that the budget constraint in the figure below is: P E E + P A A = I, where I is total income and P E is the price of education and P A is the price of all other goods. If U(E,A) = A + E, P E = 2, P A = 1, and I = 10. What is the quantity of education and all other goods consumed?
This is a corner solution where the consumer will have all of one good and none of the other.
In this case she wants 5 units of education and nothing else.
Economics
You might also like to view...
Modern macroeconomics
A. does not do well explaining the reasons for growth B. focuses on theories of firm entry and exit from the market C. has eliminated poverty D. can be defined as the study of money
Economics
Supply and demand is an economic tool that analyzes the total costs and benefits of alternative policies to different groups, such as producers and consumers.
a. true b. false
Economics