11BM2rev

11BM2rev - econ/ams 11b winter 2010 Midterm 2 Review 1....

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econ/ams 11b winter 2010 Midterm 2 Review 1. FInd the critical point(s) of the functions below subject to the given constraint. a. h ( u,v ) = 5 u + 8 v ; 2 u 2 + 3 v 2 = 30. b. k ( x,y,z ) = xy 2 z 3 ; 5 x + 8 y + 12 z = 300. 2. A household’s utility function is given by U ( q A ,q B ,q C ) = 5 ln q A +12 ln q B +18 ln q C , where q A , q B and q C are the quantities of goods of type A , B and C that the household consumes per year. The average prices per unit of these goods are p A = 10, p B = 15 and p C = 25, respectively, and the household’s disposable income is Y d = $60 , 000. a. Assuming that the household spends all of its disposable income on these three goods, how many units of each type should the household consume to maximize its utility ? b. By how much will the household need to increase its disposable income to increase its maximum utility by 5 units? Justify your answer. c.
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This note was uploaded on 03/15/2010 for the course ECON 11 taught by Professor Yk during the Spring '10 term at UCSC.

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11BM2rev - econ/ams 11b winter 2010 Midterm 2 Review 1....

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