Consider a simple model of consumer behavior for apples.
Assume individuals have preferences that can be represented by: Utility=xreg + ßln(xeco),
xeco is the quantity of eco-labeled apples (in pounds),
xreg is the quantity of regular apples (in pounds).
Consumers also face the standard budget constraint: Income=Pecoxeco + Pregxreg .
a. What is the demand function for regular apples? What is the demand function for eco-labeled apples?
b. What does the parameter ß represent?
c. What type of goods are regular apples and eco-labeled apples?
d. What is your estimated ß?