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Unformatted text preview: co/ee with 2 oz. of half-and-half. (a) Draw Carol±s indi/erence curves for co/ee and half-and-half. (b) Find Carol±s demand for co/ee and half-and-half. (c) How much co/ee and half-and-half will Carol purchase if she has $30 of income, the price of a cup of co/ee is $6 and the price of half-and-half is $2? (d) Suppose that the price of co/ee rises to $11. How will her consump-tion change? (e) How much should Carol±s income be to compensate for the increase in the price of co/ee? 6. David has the following preferences over the consumption of x and y : U ( x;y ) = ln x + 2 ln y . (a) Find David±s uncompensated demand for x and y and use these to ²nd his indirect utility function. 1 (b) Use the own-price Slutsky equation for x to determine the substitu-tion e/ect. (c) Find the compensated demand for x and y and use these to &nd the expenditure function E ( p x ;p y ;U ) . 2...
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- Summer '08
- carol, indi¤erence curves, own-price Slutsky equation