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Unformatted text preview: and music cds (M). The price of each book is 10 dollars; the price of each cd is 5 dollars. Emma’s utility is given by: U=lnB+lnM. a) Find Emma’s Budget constraint. b) Set up the Lagrangian and find her optimal consumption. c) How does her consumption change when the price of music cds goes up to 10 dollars? 3) John’s utility function is U=X 1/4 Y 3/4 . He has a monthly income I, and the prices of the goods are P X and P Y . a) Write down the optimality conditions associated with utility maximization. b) Find John’s demand equations for X and Y (consumption of X and Y as a function of prices and income). c) Explain how the demand functions for this utility function compare with those for U= . ln 4 3 ln 4 1 Y X...
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This note was uploaded on 04/19/2010 for the course ECON Econ 11 taught by Professor Mcdevitt during the Fall '07 term at UCLA.
- Fall '07