Arthur spends all of his income on two goods, soft drinks and candy bars. His utility function is given by:
U(x1,x2)= min(x1,x2)
where x1 is the number of soft drinks and x2 is the number of candy bars he buys. The price of a soft drink is $1 and the price of a candy bar is $2. His income is $60.
i)What is the most Mohammed would pay to have the price of a candy bar lowered to $1?
ii)How much income would Mohammed need, to be as well off as if the price of a candy bar had decreased to
$1?

Question

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The Answer of Arthur spends all of his income on two goods, soft drinks and candy bars. His utility function is given by:
U(x1,x2)= min(x1,x2)
where x1 is the number of soft drinks and x2 is the number of candy bars he buys. The price of a soft drink is $1 and the price of a candy bar is $2. His income is $60.
i)What is the most Mohammed would pay to have the price of a candy bar lowered to $1?
ii)How much income would Mohammed need, to be as well off as if the price of a candy bar had decreased to
$1?

Arthur Spends All of His Income on Two Goods, Soft