This preview shows page 1. Sign up to view the full content.
Unformatted text preview: why? 2. Assume that Abe has the following utility function: u=y+x 1/2 a) Would you say Abe is nicely behaved, or very nicely behaved? b) Find his demand system. c) What, if anything, is remarkable about Abes demand system? 3. Assume very nicely behaved preferences and show/prove/convincingly argue that if there are only two goods (X and Y) to choose from, then both cannot be inferior goods. 4. Consider a very nicely behaved consumer who purchases 100 units of good X and 80 units of good Y. These are the only two goods in the utility function. Suppose that the price of good X rises by 40 cents per unit and the price of good Y drops by 50 cents per unit, while the consumers nominal income remains unchanged. Will the consumer buy more, less, or the same of good X? Explain. Econ 313.2  Wissink Spring 2006 PS#2  XtraQ DUE: Friday Feb 17 at the START of class....
View Full
Document
 Fall '06
 MASSON

Click to edit the document details