Unformatted text preview: 1 +3lnX 2 a. Find the Marginal Rate of Substitution b. Derive the demand functions for X 1 , and X 2 , assuming the consumer buys some of both goods c. For I=1000, P 1 =20 and P 2 =15, find the consumer’s optimal choices and utility d. Explain what happens to optimal choices and utility if the P 1 were to decrease to 10. a. MRS=3X2/2X1 b. X1=2I/5P1 and X2=3I/5P2 c. X1=20 and X2=40 and U=2ln(20)+3ln(40) d. X1=40 and X2=40 and U=2ln(40)+3ln(40) 4. For the utility function U= 4X 1 + 2lnX 2 a. Find the Marginal Rate of Substitution b. Derive the demand functions for X 1 , and X 2 , assuming the consumer buys some of both goods a. MRS=2X2/X1 b. X1=2I/3P1 and X2=I/3P2 5. For the utility function U= 20X 1 – X 1 2 + 2X 2 a. Find the Marginal Rate of Substitution b. Derive the demand functions for X 1 and X 2 , assuming the consumer buys some of both goods a. MRS = 10X1 b. X1=10P1/P2 and X2 = (I/P2) – 10(P1/P2) – (P1/P2)^2...
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This note was uploaded on 09/15/2009 for the course ECON 420 K taught by Professor Bronars during the Fall '09 term at University of Texas.
 Fall '09
 Bronars
 Utility

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