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Unformatted text preview: ECON 204 STUDY QUESTIONS 3
Utility, Demand q.1) Suppose that a consumer’s utility function for Prices are denoted by and , and income by m. a) Find the demand functions for goods? Why? and and takes the form: U( , and ). Are and )= / / (as a function of m, normal b) Suppose now that the prices are given by =2, =1, m=100. What is the optimal consumption bundle? (You can, of course, use the demand functions you found in part a). What is the utility level at the optimal bundle? q.2) Suppose that I have a utility function U( , different ranges of / ? )=2 + What is my demand for for Hint: remember that with the linear indifference curves such as this one what the person consumes will depend on whether the indifference curves are steeper than the budget line. q.3) Consider the utility function: U( , a) Draw the indifference curves for U( , b) for what values of c) for what values of / / )=min (2 + , +2 ) )>=20 )=20 shade the area for U( , =0 =0 will the unique optimum be will the unique optimum be q.4) A consumer has a utility function: U( , )= αln + (1 − ) (, , a) Find consumer’s demands for both goods.(i.e: find b) suppose that = 2 and , m) and (, , m) = 4. Find the income offer curve and plot it. ...
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