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Consider a simple model of consumer behavior for apples. Assume individuals have preferences that can be represented by:

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?

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