Katie Kwasi's utility function is U(x₁, x₂)= 2(ln x₁)+ x₂.Given her current income and the current relative prices, she consumes 10 units of x₁ and 15 units of x₂.If her income doubles, while prices stay constant, how many units of x₁ will she consume after the change in income? A)20 B)18 C)10 D)5 E)There is not enough information to determine how many.

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Quizplus · Accepted Answer

Katie's utility function suggests that x₁ is a normal good, and since the prices remain constant, doubling her income will not change the quantity of x₁ consumed due to the logarithmic nature of the utility function with respect to x₁.

Katie Kwasi's Utility Function Is U(x1, X2)= 2(ln X1)+ X2

Katie Kwasi's Utility Function Is U(x₁, X₂)= 2(ln X₁)+ X₂