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tutorial_2ansbb - ECOS2001 Tutorial 2 1. Consider 2 goods:...

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ECOS2001 Tutorial 2 1 ECOS2001 Tutorial 2 1. Consider 2 goods: apple ( a x ) and bananas ( b x ). Charlie’s utility function is given by () . ab a b Ux,x =xx (1) He has 40 apples and 5 bananas. What is his utility for the bundle (40,5)? U=40*5=200 (2) Draw the indifference curve showing all the bundles that he likes as well as the bundle (40,5). ( 3) Hana offers to give Charlie 15 bananas if he will give her 25 apples. Would Charlie have a bundle that he likes better than (40,5) if he makes a trade? What is the largest number of apples that Hana could demand from Charlie in return for 15 bananas if she expects him to be willing to trade or at least indifferent about trading? Charlie would have 15 apples and 20 bananas that gives utility of 300=15*20 > 200. Thus, he is willing to make a trade. 200 = xa*20 Î xa=10 30=40-10 is the largest number of apples that she could demand from him 2. Hana is taking Professor Hamilton’s economics course. She will take two examinations in the course, and her score for the course is the minimum of the scores that she gets on the two exams. She wants to get the highest possible score

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This note was uploaded on 04/20/2010 for the course ECOS 2001 taught by Professor None during the One '09 term at University of Sydney.

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tutorial_2ansbb - ECOS2001 Tutorial 2 1. Consider 2 goods:...

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