1suppose that an individual has a utility function uc h

Reference no: EM13373489

1. Suppose that an individual has a utility function U(c, h) = ln(c) + h(crepresents consumption of a necessity good such as shelter, and h represents health).

a. Find that optimal amount of c and h if the individuals income is 5, the price of c is 1 and the price of h is 1.

b. What happens to the consumption of c and h if the individuals income increases to 10. Is health a normal or inferior good, or neither? What about c?

c. Suppose the price of c increases to 2, while income remains constant at 10. What happens to the consumption of c and h? Are c and h substitute goods, complementary goods, or neither?

Reference no: EM13373489

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