{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Problem Set 7 - Solution

# Problem Set 7 - Solution - Econ 313-1 TA Tian Liang...

This preview shows pages 1–3. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Econ 313-1 TA: Tian Liang Solutions to Problem Set 7 1. (a) i. max x 1 ;x 2 x 3 1 x 2 s.t. x 1 > ; x 2 > p 1 x 1 + p 2 x 2 = m ii. If x 1 = 0 or x 2 = 0 , then u ( x 1 ;x 2 ) = 0 . But for any m > , the comsumer can have a strictly positive utility level by consuming a bundle with positive amounts of both goods. iii. & 3 x 2 x 1 = p 1 p 2 p 1 x 1 + p 2 x 2 = m = ) & x 1 ( p 1 ;p 2 ;m ) = 3 m 4 p 1 x 2 ( p 1 ;p 2 ;m ) = m 4 p 2 (b) v ( p 1 ;p 2 ;m ) = u ( x 1 ( p 1 ;p 2 ;m ) ;x 2 ( p 1 ;p 2 ;m )) = ¡ 3 m 4 p 1 ¢ 3 ¡ m 4 p 2 ¢ = 27 m 4 256 p 3 1 p 2 2. (a) max x 1 ;x 2 p x 1 x 2 s.t. x 1 > ; x 2 > p 1 x 1 + p 2 x 2 = m & x 2 x 1 = p 1 p 2 p 1 x 1 + p 2 x 2 = m = ) & x 1 ( p 1 ;p 2 ;m ) = m 2 p 1 x 2 ( p 1 ;p 2 ;m ) = m 2 p 2 (b) v ( p 1 ;p 2 ;m ) = u ( x 1 ( p 1 ;p 2 ;m ) ;x 2 ( p 1 ;p 2 ;m )) = r m 2 p 1 & m 2 p 2 = m 2 p p 1 p 2 1 (c) x 1 (1 ; 1 ; 100) = 100 = (2 & 1) = 50 , x 2 (1 ; 1 ; 100) = 50 , v (1 ; 1 ; 100) = 50 ....
View Full Document

{[ snackBarMessage ]}

### Page1 / 7

Problem Set 7 - Solution - Econ 313-1 TA Tian Liang...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online