$$U(q_1,q_2)=4{q_1}^{0.5}+q_2$$ $$P_1=1$$ and $$P_2=2$$ Initially $$Income=40$$ Then the question asks :how do I know what income I can get a corner solution?

Anyone can help me with this?

Thank you

  • 2
    $\begingroup$ I'm voting to close this question as off-topic because it is a homework question with no effort shown. $\endgroup$ – Giskard Apr 30 '15 at 17:19
  • $\begingroup$ @denesp this is not a homework question and I have put in my effort to think but just cannot figure it out. The question is only asking about for what income I can get a corner solution. I ONLY NEED THE IDEA! $\endgroup$ – UnusualSkill Apr 30 '15 at 17:26
  • $\begingroup$ The procedure to answer this question is outlined in the question below. Look at my answer on that question as a guide on how to answer it. economics.stackexchange.com/questions/4997/… $\endgroup$ – Jamzy May 1 '15 at 6:38
  • $\begingroup$ @Jamzy I know how to find interior solution for income=40, However the question asks further about for what income it will get a corner solution? $\endgroup$ – UnusualSkill May 1 '15 at 7:50
  • $\begingroup$ Set for it to be a corner solution, one of the quantities are no longer a choice variable. Change it to zero, then optimise. $\endgroup$ – Jamzy May 1 '15 at 7:53

The corner solutions are where $q_1=0$ or $q_2=0$. So just take the first-order conditions, plug in zero for the value, and solve for income. For incomes less than that amount, the quantity demanded is zero.

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  • $\begingroup$ but how do I know which 1 is zero in this case $$q_1$$ or $$q_2$$?N How you determine? $\endgroup$ – UnusualSkill Apr 30 '15 at 17:32
  • $\begingroup$ May i Know what you get for this question? I want to double check $\endgroup$ – UnusualSkill May 1 '15 at 3:12

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