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Unformatted text preview: UNIVERSITY OF TORONTO Faculty of Arts and Science October 2009 PROBLEM SET 1 ECO200 - Section L0101 Carlos J. Serrano The problem set is due on Friday October 16, 2009 at 12.10pm in your official assigned tutorial (see syllabus for locations). Problems sets submitted after the deadline or not submitted in your assigned tutorial will receive a zero. If you cannot attend the tutorial, you must make sure that somebody else will submit the problem set for you. Question 1 (25 points) [Optimal consumption bundle] A consumers utility is given by ( ) = 0 5 ln( ) + ln( ) where = 5 = 1 Let the price of good and be and , respectively. Let be income. (a) What is the marginal rate of substitution? (b) Write the consumers utility maximization problem (c) Assume that 1 = 2 , = 1 and = 100 . Calculate the consumers optimal consumption bundle....
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- Spring '10