midterm2

Intermediate Microeconomics: A Modern Approach, Seventh Edition

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14.04 Midterm Exam 2 Prof. Sergei Izmalkov Wed, Nov 5 1. Consumer 1 has expenditure function e 1 ( p 1 ,p 2 ,u 1 )= u 1 p 1 p 2 and consumer 2 has utility function u 2 ( x 1 ,x 2 )= 2003 x 3 1 x a 2 . (a) What are Marshallian (market) demand functions for each of the goods by each of the consumers? Denote theincomeo fconsumer 1 by m 1 and the income of consumer 2 by m 2 . (b) For what value(s) of the parameter a will there exists an aggregate demand functions that is independent of the distribution of income? 2. Suppose that utility maximization problems and expenditure minimization problems are well de ned and utility and expenditure functions satisfy all necessary “nice” properties. (a) Show (prove) that utility maximization implies expenditure minimization and vice versa. (b) List all relevant identities that are result of a. (c) Derive Roy’s identity. (d) Derive Slutsky equation.
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This homework help was uploaded on 02/01/2008 for the course ECON 14.04 taught by Professor Izmalkov during the Fall '06 term at MIT.

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