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Sample Hourly 1A

Sample Hourly 1A - Ec 16 Quantitative Intermediate...

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Ec. 16 Quantitative Intermediate Microeconomics Sample Hourly Exam #1 1) Assume that the Williams family has an income of $M per month and that its utility function for housing (X) and all other goods (Y) is U(X,Y)=XY+X. The current prices are Px per unit for housing and Py per unit for all other goods. Derive MarshaIlian or ordinary demands for housing and all other goods. (Show all of your work.) 2) George, Fred, and Susie have different incomes but they each spend all of their income on environmentally harmful products and all other goods. They face the same prices for environmentally harmful products and all other goods. Because George does not really care about the environment, he buys twice as many environmentally harmful products as does Fred. He buys 2X* of environmentally harmful products and Y* of other products. Fred buys X* of environmentally harmful products and Y* of other products. The Environmental Protection Agency has just proposed new regulations that would increase the prices of environmentally harmful products but reduce the prices of other products. After the EPA changes, George, Fred, and Susie face the same new prices. Their incomes do not change. a) Given Fred's income, he can still buy X* of environmentally harmful products and Y* of all other products if he spends all of his income. Will Fred now choose more environmentally harmful products, will he choose less, or will he choose the same amount as before the regulation change?
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