{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ps8_09

# ps8_09 - Cornell University Economics 3130 Problem Set 8...

This preview shows pages 1–2. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Cornell University Economics 3130 Problem Set 8 Due 4/3/09 1. Suppose there are two consumers A and B comprising the entire market for good x 1 . There is also a good x 2 . A’s consumption bundle is x A = ( x A 1 ,x A 2 ) and B’s is described in similar fashion. Their utility functions are u A 1 = x A 1 + 200 3 x A 2- ( x A 2 ) 2 and u B 2 = x B 1 + 400 3 x B 2- ( x B 2 ) 2 . The price of good x 1 is 1 and the price of good x 2 is p . Individuals have incomes I = ( I A ,I B ) Assume that both individuals have sufficient income so that an interior solution characterizes their optimal choices. (a) What are the (Marshallian) demands for A and B ? What is the market demand X 2 ( p,I )? (b) What are the indirect utility functions for A and B? (c) What is A’s price elasticity of demand for good 2? What is B’s? What is the price elasticity of market demand for good 2? Now, suppose that the supply curve for good 2 is y s 2 =- 20 + 2 p and that the market is competitive....
View Full Document

{[ snackBarMessage ]}

### Page1 / 2

ps8_09 - Cornell University Economics 3130 Problem Set 8...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online