ps2x313_f05 - Instead of discarding the lower grade,...

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1) Recall that Professor Goodheart always gives two midterms in his communications class. He only uses the higher of the two scores that a student gets on the midterms when he calculates the course grade. Let x = score on midterm 1 and let y = score on midterm 2. a) Nancy Lerner has $450 to allocate across the two midterms so to get good scores. She can hire a tutor with the $450 to help her. Suppose she determines that the “price” she has to effectively pay per exam score point on each exam is $5 per point. That is to say, $Px = $Py = $5. What midterm grades bundle in communications will maximize Nancy’s utility subject to her budget constraint? (Use your utility functions from PS#1 – XtraQ.) b) Recall that Nancy is also taking a course in economics form Professor Stern. Professor Stern gives two midterms.
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Unformatted text preview: Instead of discarding the lower grade, Professor Stern discards the higher one. Again, let x = score on midterm 1 and let y = score on midterm 2 and assume $Px = $Py = $5. What midterm grades bundle in economics will maximize Nancys utility subject to her budget constraint? (Use your utility functions from PS#1 XtraQ.) c) If you were giving Nancy advice on what class to take, econ or communications, what would you tell her? 2) Suppose that Max has the utility function u(x, y) = x(y + 1). The price of x is $2 and the price of y is $1. Income is $10. How much x does Max demand? How much y? If his income doubles and prices stay unchanged, will Max's demand for both goods double? Econ 313.1 - Wissink - Fall 2005 PS#2 - XtraQ DUE: Monday Sept. 19 at the START of class....
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This note was uploaded on 10/29/2009 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell University (Engineering School).

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