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Mathematics, 17.10.2019 06:00 carterhoward

Sam’s utility function is u(x1, x2) = 2x1 + x2, where x1 is the number of units of good 1 he consumes per week and x2 is the number of units of good 2 he consumes per week. sam has $200 a week to spend. the price of x1 is $4. sam currently doesn’t consume good 2, as it is way too expensive. sam has received an invitation to join a club devoted to the consumption of good 2. if he joins the club, sam can get a discount on the purchase of good 2. if he belonged to the club, he could buy good 2 for $1 a unit. how much is the most sam would be willing to pay to join this club?

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