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Unformatted text preview: Problem Set #2 1 Basics For the first five utility functions below, find the demand functions. 1. u ( x,y ) = x 2 y 3 2. u ( x,y ) = ( x 2)( y 3) 3. u ( x,y ) = 2 ln x + 3 ln y 4. u ( x,y ) = x 2 3 y 5. u ( x,y ) = x 1 2 y 1 2 6. Find the indirect utility function associated with 1 above. 7. Find the indirect utility function associated with 5 above. 8. If you have done the problems correctly, your answers to 1, 3, and 4 should be identical. Explain in words why this is the case. 9. For the utility function in 4, find the expenditure function  an expres sion for the amount of income necessary to give the consumer a level of utility u given prices. (That is, minimize E = p x x + p y y subject to the constraint that u = u ( x,y )). 2 Word Problems 1. Suppose that an individual has utility function u ( x,l ) = ( x x ) 1 α l α , where x denotes consumption of goods while l denotes leisure time; x and α are parameters of the utility function. The individual’s total income is I = we...
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This note was uploaded on 11/12/2009 for the course ECONOMICS 701 taught by Professor Baker during the Spring '09 term at CUNY Hunter.
 Spring '09
 Baker
 Utility

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