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Exam 1 - Practice - Midterm Exam Eco 701 Fall 2009 Practice...

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Midterm Exam Eco 701 - Fall 2009 Practice General Instructions: Please answer all of the questions in your blue book. You have the entire class time (approximately 2 hours) to complete the exam. Be sure to mark your answers clearly and show all work. If you have to cross out mistakes or superfluous material, please do so in such a way so that I do not get confused in grading your exam. You may answer the questions in any order you choose, but once again, please take care in indicating which question you are answering. Please hand in the exam sheet with the exam. 1 Consumer Theory A consumer has the utility function u = x ( α - βx ) + y , where α and β are parameters. 1. Find the regular demand functions for each good (in any order you choose). 2. Find the compensated demand functions for each good. 3. Use the Slutsky equation to find expressions for the magnitude of income and substitution effects for good x . Is there anything unusual about your answer?
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