Homework2.200

Homework2.200 - Ryan Oprea Econ 200, Fall 2008 Homework #2...

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

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Ryan Oprea Econ 200, Fall 2008 Homework #2 This homework is due on October 29 at the beginning of class. You may consult with others on the homework, but must turn in your own work (i.e. please dont copy homework from others) and must list who you worked with on the homework. If there is insufficient information to answer a question, state a reasonable assumption that allows you to do so and use it when working through the problem. 1. (40 points) Suppose Bob and Tom consume books and money left over (i.e. purchasing power on other goods). Bobs utility function is U bob = x books + x m while Toms utility function is U tom = 5 x books + x m . Bob is wealthy with an income of $50 while Tom is less wealthy with an income of $25. (a) Derive a demand function for books for both Bob and Tom. (b) Suppose Bob and Tom can either own zero books or one book. Derive the willingness to pay for a book for both Bob and Tom. Construct the industry demand curve for books. (c) If only one unit was for sale, which would get the unit and what can we say about prices and consumer surplus? (d) Who prefers books more strongly Bob or Tom? Who has higher consumer surplus? Does higher willingness to pay imply stronger preferences in this example?...
View Full Document

Page1 / 2

Homework2.200 - Ryan Oprea Econ 200, Fall 2008 Homework #2...

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

View Full Document Right Arrow Icon
Ask a homework question - tutors are online