Consider the preference relation over R2+ such that, for any x, y ∈ R2+, x y if and only if ex1 + 1 ≥ ey1 + 1.
(a) Illustrate the indifference curves of this preference relation.
(b) Is this preference relation monotone?
(c) Is this preference relation convex?
(d) Provide a utility function u(x1, x2) that represents this preference relation.
(e) Given prices p = (p1, p2) > 0 and income m > 0, derive the consumer’s demand functions.
