See if he consumes even a little electricity he has to pay R and if he doesn't consume any electricity he doesn't have to pay R
So his budget line is discontinuous at (xo=1 , xe=0)
His budget line is as follows: xe^2/2 + xo=1-R for xe not equal to 0
xo=1 for xe=0 Now lets assume he consumes electricity
so optimising utility we get xo*=1/2-R and xe=1
Utility at that point= 1.5 -R
Utility at xe=0,xo=1 (corner soln) is 1
If 1.5-R< 1 he will never consume electricity
So R can be max 0.5
Locked
