100A Mid2 SP09 A0

# 100A Mid2 SP09 A0 - Econ 100A: Microeconomics, Spring 2009,...

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Econ 100A: Microeconomics, Spring 2009, Dr. Famulari Midterm 2A: 250 Points Total Name _____________________________________ PID _________________________ Question 1 /55 Question 2 /60 Question 3 /55 Question 4 /45 Question 5 /35 Total /250

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Question 1: 55 points total 1A. (5 points) A consumer derives utility from the consumption of X and Y. What has changed in the consumer’s economic environment and in what direction has it changed? Y | | | | | | | | | | | | U 0 U 1 |______________________________________ X 1B. (30 points) Carefully describe in words and illustrate on your graph above the income and substitution effects of the change in the consumer’s economic environment. Label as completely as possible. 1C. (20 points) What is the definition of a normal good? Are X and Y normal goods in the graph above? Be SPECIFIC about what in the graph you compared to reach your conclusion.
Question 2. (55 points total) Toni minimizes her expenditures subject to achieving utility level __ U . Suppose Toni’s utility function can be represented as 3 2 3 1 y x U = 2A. (10 points) What is the Lagrangean for this problem? 2B. (15 points) What are the first order conditions? 2C. (15 points) Solve for Toni’s compensated demand functions X C (Px, Py, __ U ) and Y C (Px, Py, __ U ) 2D. (20 points) What is the definition of NET COMPLEMENTS? Are X and Y net complements for Toni? Prove your answer carefully.

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Question 3 (55 points total) Matt gets utility from X and Y. Matt only likes to consume 2X with Y: more X without getting more Y is of no use to Matt as is more Y without getting more X. Matt minimizes his expenditures subject to
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## This note was uploaded on 04/02/2010 for the course ECON 100A ECON 100A taught by Professor Famulari during the Spring '10 term at UCSD.

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100A Mid2 SP09 A0 - Econ 100A: Microeconomics, Spring 2009,...

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