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Unformatted text preview: Economics 302 Silve Parviainen Intermediate Microeconomics Spring 2007 Mock Midterm I 1 Preferences Consider a person whose preferences can be presented by utility function u ( x 1 , x 2 ) = x 1 ( x 2 + 1). (a) For the following four pairs of consumption bundles, determine whether the consumer prefers the first one to the second one, the second one to the first one, or is indifferent between the bundles. (2 , 1) (1 , 2) (2 , 2) (1 , 5) (2 , 4) (3 , 3) (4 , 0) (2 , 1) (b) Does u 2 = x 1 x 2 2 + x 1 2 represent the same preferences as utility function u 1 ? Why or why not? Does u 3 = x 1 ( x 2 + 2) represent the same preferences as u 1 ? Why or why not? 2 Consumer Optimum I According to Introspection Consumer Research Inc. your preferences for food ( f ) and housing ( h ) can be presented by utility function u ( f, h ) = ( f- c f ) h where c f is some positive constant. (a) Give an interpretation for c f ....
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This note was uploaded on 09/27/2008 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.
- Spring '08