105midterm1_sp06

105midterm1_sp06 - Economics 105 Midterm 1 March 6, 2006...

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Economics 105 Midterm 1 March 6, 2006 Name: Discussion Section: You have seventy-five minutes to complete the quiz. Be sure to get to all five questions. Explanations are required for all answers. 1. (16 pts) 2. (12 pts) 3. (16 pts) 4. (15 pts) 5. (16 pts) 1
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1. Lucy enjoys consuming tea ( x ) and cookies ( y ). Her utility function is given by: U ( x,y ) = 4 x 1 / 2 + 2 y 1 / 2 a) Derive Lucy’s Hicksian demands for x and y . (6 pts) b) Fill in the blank! “Hicksian demands are homogeneous of degree in .” (2 pts) c) Verify that the Hicksian demand for x that you solved for in part a. satisfies your answer to part b.(2 pts) d) Find Lucy’s expenditure function. (2 pts) e) Fill in the blank! “Expenditure functions are homogeneous of degree in .” (2 pts) f) Verify that the expenditure function you solved for in d. satisfies your answer to part e. (2 pts) 2
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2. Peter and Susan are the only two people in the whole wide world. Both Peter and Susan like consuming adventures ( x ) and presents (
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105midterm1_sp06 - Economics 105 Midterm 1 March 6, 2006...

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