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w4 - roses 2 Suppose that an individual has the following...

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Economics 11: Microeconomic Theory 1 Professor Christian Hellwig Practice Problems Week 4 1) Joseph likes roses (R) and tulips (T) equally, and views them as perfect substitutes in proportion 1 to 1. The price of a rose is $3, the price of a tulip is $5, and Joseph has $30 to expend in flowers. a) How much of each flower will Joseph buy? b) Now, suppose that the price of a rose rises to $6. How does the consumption of Joseph change? c) What are the Joseph’s demands for roses and tulips (it must be a function of income and prices)? d) How much should Joseph’s income increase to compensate for the rise in the price of
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Unformatted text preview: roses? 2) Suppose that an individual has the following utility function: U(X,Y) = X (1 + Y) a) Find the uncompensated (marshallian) demand for X and Y. b) Are X and Y normal or inferior goods? c) Find the expenditure function. d) What is the minimum expenditure necessary to achieve a utility level of U= 72 with Px=4 and P Y =2?. 3) A consumer has the following Utility function: U = X 1/2 + Y 1/2 a) Find the compensated demand for X and Y b) Find the expenditure function c) Find the uncompensated demand for X and Y. d) Show that the Slutsky equation holds...
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