This preview shows page 1. Sign up to view the full content.
1.
Assume Bree has the utility function:
u=min{X, Y}.
a)
Graph Bree’s market demand for X.
b)
On this same graph, show the graph for Bree’s Hicksian demand for X at some level of
utility arbitrarily chosen on the indifference curve ICo obtained when the price of X is
Po, given Py and I.
c)
Suppose there is an increase in the price of X from Po to P
1
.
i)
Illustrate the traditional measure of Dupuit change in Bree’s consumer’s surplus.
ii) Illustrate Bree’s compensating variation for this price increase.
2.
Recall Abe from the last XtraQ with the utility function:
u=y+x
1/2
and assume an interior
solution.
From his demand system, that is, from his X* and Y*, determine the following
expressions in Abe’s Slutsky equations.
That is, using Abe’s X* and Y* find the following:
(Assume all these partials refer to the total or market or Marshallian effect.)
a)
(∂X/∂Px)
M
b)
(∂X/∂Py)
M
c)
(∂Y/∂Px)
M
d)
(∂Y/∂Py)
M
3.
Ralph consumes only two good, X and Y, and has the following utility function:
This is the end of the preview. Sign up
to
access the rest of the document.
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).
 Fall '06
 MASSON
 Utility

Click to edit the document details