Suppose a consumer has utility functionUq1 q2 q1q2 and choos

Suppose a consumer has utility functionU(q1, q2) =q1+q2, and chooses to consumezero units of good 1, but nine units of good 2. What can you conclude about the prices that the consumer faces?

Solution

According to the utility function goods q1 and q2 are substitutes.Consumer chooses to consume 0 units of q1 and 9 units of q2.A consumer will behave in such a manner only when price of q1 is greater than price of q2.Since goods are substitutes,consumer will switch to the cheaper goods and stop the consumption of the expensive good.

Pq1>Pq2