1.
Using IC/BL analysis like we did in class, show that there is NO excess burden from a
commodity tax on X if the utility function is:
u = min {X, Y}.
2.
Assume that Abe gets utility from only X and Y.
Assume that for Abe, Y is always an
inferior good and X is always a normal good.
Also assume that X and Y are NOT Giffen
goods.
Write each Slutsky equation and sign each partial derivative with a +, , or ?. (Note
that there are 3 of these terms in each equation.
And yes, some of the same ones appear in
more than one equation.)
3.
Perloff and Buschena, 1991 have estimated that the coconut oil demand function is
X
D
= 1,200 – 9.5Pc + 16.2Pp + 0.2Y where X is the quantity of coconut oil demanded in
thousands of metric tons per year, Pc is the price of coconut oil in cents per pound and Pp is
the price of palm oil in cents per pound, and Y is the income of consumers.
Assume that Pc
is initially 45
¢
per pound, Pp is 31
¢
per pound and X is 1,275 thousand metric tons per year.
Calculate the own price and cross price elasticities of demand for coconut oil.
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This note was uploaded on 10/05/2008 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell.
 Fall '06
 MASSON
 Microeconomics

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