Homework3

# Principles of Microeconomics + DiscoverEcon code card

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UNIVERSITY OF CALIFORNIA SANTA BARBARA Economics 1 Francisco Azeredo Principles of Economics Ben Hansen Summer 2007 Session A Homework #3 I. Problems: Chapter 5 I.1 Book Problems Please place your answers in the space below. Take the time to draw the supply and  demand graphs necessary to explain your answer. Q4.  Q5. Q7. 1

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Q9. Q10. I.2 Additional Problems Suppose that you have \$16 dollars to spend on two different goods: X and Y. The  marginal utility of good Y is equal to 1 for any amount of goods X and Y consumed. The  marginal utility of good X equals to 1/x. a. Derive the budget constraint for p x  = 1 and p y  = 8. [ Hint: The general budget  constraint is p x *x + p y *y = m ] 2
b. When p x   = 1 and p y   = 8, what would be the rational amount of good X to be  purchased? What would be the rational amount of good Y to be purchased? What

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Unformatted text preview: is the total expenditure in this case? c. Maintaining p y = 8, compute the demand for good X for the following set of prices, p x = 1, 2, 4, and 8. Is the demand function downward sloping? Can you provide some intuition for this result? Plot the demand function for the different prices. d. Maintaining p x = 1, compute the demand for good Y for the following set of prices, p y = 1, 2, 4, and 8. Is the demand function downward sloping? Can you provide some intuition for this result? Plot the demand function for the different prices. II. Problems: Chapter 6 3 II.1 Book Problems Q1. Q3. Q4. 4 Q5. Q6. Q7. 5 Q9. Q10. 6...
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## This homework help was uploaded on 02/01/2008 for the course ECON 01 taught by Professor Azeredo during the Summer '07 term at UCSB.

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Homework3 - is the total expenditure in this case? c....

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