Answer:
Katie Kwasi's Utility Function
The units of x1 that she will consume after the change in income is:
= 40 units of x1
Explanation:
a) Data and Calculations:
Katie Kwasi’s utility function, U(x1, x2) = 2(ln x1) + x2
Current consumption = 10 units of x1 and 15 units of x2
When her income doubles, with prices staying constant, Katie will consume:
= 2(2 * 10 of x1) + 15 of x2
= 40 units of x1 + 15 units of x2
Therefore, she will consume 40 units of x1 and 15 units of x2
b) The above function expresses mathematically Katie's utility to be a function of the units of x1 and x2 that she can consume, given her income constraint. If her income doubles, Katie will consume double units of x1 and the same units of x2 as she was consuming before the change in income.
