pset2_fall2009

# pset2_fall2009 - 1 +3lnX 2 a. Find the Marginal Rate of...

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Economics 420K Problem Set 2 Demand Theory Bronars 1. For the utility function U= X 1 X 2 3 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=40, P 1 =1 and P 2 =2, find the consumer’s optimal choices and utility d. Explain what happens to optimal choices and utility if the P 1 were to increase to 2. 2. For the utility function U= 4X 1 .5 + X 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=260, P 1 =1 and P 2 =4, find the consumer’s optimal choices and utility d. Explain what happens to optimal choices and utility if the P 2 were to decrease to 2. 3. For the utility function U= 2lnX
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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 consumers optimal choices and utility d. Explain what happens to optimal choices and utility if the P 1 were to decrease to 10. 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 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...
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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 at Austin.

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