Econ100A_REVIEW2008_Final

# Econ100A_REVIEW2008_Final - REVIEW QUESTIONS 1 George's and...

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REVIEW QUESTIONS 1. George’s and Fred’s utility functions over goods 1 and 2 are given by: U G (x 1 , x 2 )= 3x 1 + x 2 U F (x 1 , x 2 )= 9x 1 + 4x 2 , respectively. Is it reasonable to say that Fred likes good 1 more than George does? Explain and discuss. 2. Give an example of a utility function U(x 1 , x 2 ) with demand functions x 1 *(p 1 ,p 2 ,I) and x 2 *(p 1 ,p 2 ,I) that satisfies x 1 *(6,3,540)=90 and x 2 *(6,3,540)=0 such that neither x 1 nor x 2 is a bad . 3. Individuals in Minsk consume only potatoes and caviar, x p and x c . Suppose potatoes are a Giffen good. Draw a graph with 3 budget lines and 2 indifference curves showing the income and substitution effects of a decrease in the price of potatoes, p p on the consumption potatoes, x p . For this graph to work, is caviar an inferior good or is it normal? Explain 4. My cross-price elasticity for consumption of bagels with respect to the price of cream cheese is -.2. Presently I consume 10 bagels a week and the price of cream cheese is

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Econ100A_REVIEW2008_Final - REVIEW QUESTIONS 1 George's and...

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