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Laxmi is a poor agricultural worker. Her consumption basket comprises three commodities: rice and two vegetables - cabbage and potato. But there are occasionally very hard days when her income is so low that she can afford to buy only rice and no vegetables. However, there never arises a situation when she buys only vegetables and no rice. But when she can afford to buy vegetables, she buys only one vegetable, namely the one that has the lower price per kilogram on that day. Price of each vegetable fluctuates day to day while the price of rice is constant. Write down a suitable utility function that would represent Laxmi’s preference pattern. Explain your answer.
Ans. (p+c+1)(r-5), If m<5p(r), then laxmi will only buy rice otherwise she will buy p or c, which every is cheaper with r.
I didn't get how the 5 came here?
How about u = r+ min(r,max[p,c]) ?
r and min (r, max{p,c} )are pft subst
min (r, max{p,c} ) means she'll always buy rice no matter what and the cheaper one between p and c (only corner solutions)
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