econ11_08_problems1_sol

# econ11_08_problems1_sol - Eco11 Fall 2008 Simon Board...

This preview shows pages 1–2. Sign up to view the full content.

Eco11, Fall 2008 Simon Board Economics 11: Solutions to Practice Problems 1 (Week 2) 29 September, 2008 1. Utility Functions Deﬁne the utility functions and draw the indiﬀerence curves for each of the following cases: a) “Every time I consume one unit of x 1 , I want to consume 2 units of x 2 ”. b) “If the price of x 1 is bigger than the price of x 2 , I will only consume x 2 . If the price of x 2 is bigger than the price of x 1 , I will only consume x 1 ”. c) “I don’t care about the prices of x 1 and x 2 , I only want to consume x 2 ”. Solution I won’t draw the pictures. I refer you to the lectures. (a) Preferences are represented by u ( x 1 ,x 2 ) = min { x 1 , 2 x 2 } . That is, preferences are perfect complements. (b) Preferences are represented by u ( x 1 ,x 2 ) = x 1 + x 2 . That is, preferences are perfect substi- tutes. (c) Preferences are represented by u ( x 1 ,x 2 ) = x 2 . 2. Consumption with Perfect Substitutes

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 4

econ11_08_problems1_sol - Eco11 Fall 2008 Simon Board...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online