ps3x313_f08 - time 4 Suppose Rachael Pay gets utility from...

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1) Consider Ville. He has the following (and now very well know) utility function: u = X 1/2 Y 1/2 . Find the equation representing Ville’s Engel Curve for X, where we want an equation for total expenditures on X as a function of income. 2) Suppose that the Jed’s demand for cherries (C) is completely inelastic at the value, C = 500 bushels. From Jed’s indifference curve/budget line diagram prove/demonstrate that for Jed, cherries must be an inferior good. Where would Jed’s HICKSIAN DEMAND curve for cherries at the original level of utility be relative to his MARSHALLIAN DEMAND CURVE for cherries? 3) Sowmya is a very well-behaved woman who consumes only two goods, V and M. Show/prove/argue why it is impossible for both V and M to be inferior goods at the same
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Unformatted text preview: time. 4) Suppose Rachael Pay gets utility from ounces of milkshakes made with milk(M) and ice cream(C) – both measured in ounces – according to the utility function: u = min {3C, 1M}. Suppose we examine surplus measures for Rachael as a consequence of an increase in the price of milk. Using Marshallian and Hicksian demand curves for milk, determine the relationship between the ordinary Dupuit change in market consumer’s surplus and the compensating variation of the price increase. Econ 3130.1 - Wissink - Fall 2008 PS#3 - XtraQ DUE: Wednesday October 1 in class – along with PS3-Wissink Workbook questions...
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This note was uploaded on 02/18/2009 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell.

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