micro-ex6 - Ani Guerdjikova Department of Economics Cornell...

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Ani Guerdjikova Fall 2006 Department of Economics Intermediate Microeconomics Cornell University ECON 313 Problem Set 6 Problem 24 (Expenditure minimization, duality) Farmer Frank has preferences for ham ( x 1 ) and cheese ( x 2 ) which are given by the utility func- tion U ( x 1 ; x 2 )=2 x 1 + x 2 Thepricesare p 1 =1 and p 2 =2 . a) Yesterday, farmer Frank wanted to obtain a utility level of U =5 . Represent his indifference curve in a diagram and determine his optimal consumption bundle. b) Today, farmer Frank is not as hungry. He wants to obtain a utility level of U =1 .D rawh isnew indifference curve and determine the optimal consumption bundle. Does the marginal rate equal the price ratio? c) Determine farmer Frank’s Hicks’ demand functions, h i ¡ p 1 ; p 2 ; U ¢ for i =1 , 2 .D e r i v eh i s expenditure function e ¡ p 1 ; p 2 ; U ¢ . Problem 25 (Demand and duality, Cobb-Douglas utility function) The utility function of a consumer is given by:
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This homework help was uploaded on 04/17/2008 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell University (Engineering School).

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micro-ex6 - Ani Guerdjikova Department of Economics Cornell...

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