Question
Microeconomics Question on Consumer theory
A consumer has utility function 𝑢(𝑥1, 𝑥2 ) = max {0.5 𝑥1 , 0.5 𝑥2} + min{𝑥1 , 𝑥2}.
She has some positive income 𝑦, and faces positive prices 𝑝1, 𝑝2 for goods 1 and 2 respectively. Suppose 𝑝2 = 1. There exists a lowest price 𝑝̅̅1 such that if 𝑝1 > 𝑝̅̅1 then the unique utility maximizing choice is to buy ONLY good 2. Then 𝑝̅̅1 is _________ (in integer).
Answer
The correct answer is: 2