# micro-ex-5 - Ani Guerdjikova Department of Economics...

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Ani Guerdjikova Fall 2006 Department of Economics Intermediate Microeconomics Cornell University ECON 313 Problem Set 5 Problem 20 (Utility maximization, quasi-linear utility function) Julia eats only nuts and berries. Her preferences are described by the quasi-linear utility function U ( x n ; x b )=2 x n + x b Thepricesaregivenby p n > 0 and p b > 0 . Julia has an income of m . a) Draw the indifference curves of Julia and her budget constraint in a diagram. State her optimiza- tion problem. b) Determine for which prices p n and p b and which values of m the relative price of nuts is higher / lower than the highest / lowest achievable MRS. When does Julia’s optimization problem have a corner solution? c) Determine the demand of Julia for nuts and berries. d) Derive the income-offer curve and the Engel curves of Julia. e) Determine the price-offer curve for p b =1 and m =9 . Problem 21

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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-ex-5 - Ani Guerdjikova Department of Economics...

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