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Homework2

# Homework2 - W3211 Spring 2009 Professor Vogel Homework#2...

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W3211 Spring 2009 Professor Vogel Homework #2: Due February 10, 2009 ° Please write your name on the top of every page of your homework (in case they get separated) and please staple all pages together. ° Where appropriate, you must show all work. If you just give an answer without work, you don°t receive credit (on a mathematical question, of course). 1. Bob°s utility function is U ( x; y ) . Mary°s utility function is F ( U ( x; y )) , where F is a continuous, strictly increasing function. Suppose that Bob°s income is \$10 and that he faces prices p x = \$2 and p y = \$7 . On the other hand, Mary°s income is \$30 and she faces prices p x = \$6 and p y = \$21 . If Bob°s utility maximizing bundle is ( x ° ; y ° ) , can you say anything about Mary°s utility maximizing bundle? 2. Bob°s utility function is V ( x; y ) , the price of x is \$2 , the price of y is \$5 , Bob has \$50 to spend, and Bob°s utility maximizing bundle is an interior bundle (i.e. x > 0 ; y > 0 ). Now suppose that price of x increases to \$4 , the price of y increases to \$10 , and Bob has \$100 to spend. Can you say if Bob°s new utility maximizing bundle contains more

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Homework2 - W3211 Spring 2009 Professor Vogel Homework#2...

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