Demand_Min.docx - Question 4 a U = 5min{x1 x2 2x2 has two parts We will either demand both x1 and x2 is the first part i.e 5min{x1 x2 gives higher MU

Demand_Min.docx - Question 4 a U = 5min{x1 x2 2x2 has two...

This preview shows page 1 - 2 out of 2 pages.

Question 4 a. U = 5min{x 1 , x 2 } + 2x 2 has two parts We will either demand both x 1 and x 2 is the first part i.e. 5min{x 1 , x 2 } gives higher MU than 2x 2 Or we will demand only x 2 if MU gives higher utility per unit of money Case 1: Both x 1 and x 2 are demanded If both x 1 and x 2 are demanded, both will be demanded in equal proportion since we have a min function. So, Demand will be: x 1 = x 2 = I/(P 1 + P 2 ) Utility in this case will be: 5*x 2 + 2*x 2 = 7x 2 = 7I/(P 1 + P 2 ) Case 2: only x 2 is demanded If only x 2 is demanded, the demand will be: X 1 = 0 X 2 = I/P 2 Utility in this case: 0 + 2I/P 2 Demand will be as follows: Demand only X 2 if utility from Case 2 > Utility from Case 1 Both X 1 and X 2 will be demanded if Utility from case 2 < Utility from Case 1
Image of page 1

Subscribe to view the full document.

Image of page 2
  • Spring '14

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes