46809ffec2e02c35d9a7e33bad27059f_5ee78614f0846d702a2c6fc932606ebb.docx

46809ffec2e02c35d9a7e33bad27059f_5ee78614f0846d702a2c6fc932606ebb.docx

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Economics 11 Problem Set #2 Due September 28 1 The utility that Lisa receives by consuming food  F and clothing C is given by:     4FC 2 C) U(F, Denote by  PF  the price of food, by  PC  the price of clothing and by  I   Lisa’s income. 1a) What are the marginal utilities of food and clothing for Lisa? 1b) What are the optimality conditions for Lisa ? That is, what are the  conditions a utility-maximizing market basket must satisfy ? 1c) What is Lisa’s  food demand function? Graph it. 1d) What is the equation for Lisa’s Engel curve for food? Graph it. 1e) Is food a normal or an inferior good? 1f) Let  PC  =1 and  = 30. Suppose that the price of food increases from  PF =2 to  PF =3. Draw the substitution and income effects of the change in the price of food.  2 Anna’s demand curve for pineapples is:  P Q A 5 15 , where  A Q  is the quantity  consumed by Anna and P is the price. Charles’ demand curve for pineapples is
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