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Econ 301 – F07
PROBLEM SET 3  due in class on Tuesday Oct 2
Wissink
1.
For changes in Py, diagrammatically show what the price consumption curve looks like for the
following utility functions:
u(x,y) = y + v(x); u(x,y) = x
2
y
2
;
u(x,y) = x + y;
u(x,y) = min{x,y}.
2.
For changes in I, diagrammatically show what the income consumption curve looks like for the
following utility function: u(x,y) = y + v(x).
3.
For changes in Px, diagrammatically show the income and substitution effects
ala’ Slutsky
for the
following utility functions:
u(x,y) = x
2
y
2
;
u(x,y) = x + y;
u(x,y) = min{x,y}.
4.
Derive the demand functions for x & y for the utility function:
u(x,y) = 2X + 3Y
5.
Remember… James Bond’s favorite drink is a Vodka Martini, shaken, not stirred.
His personal
perfect recipe is to always use 1 part vodka to 3 parts gin.
If martinis are the only thing James
consumes, and we measure parts as ounces (oz) then what is the solution to James’s constrained utility
maximization exercise assuming that P
V
= $6 per oz, P
G
= $8 per oz and that James’s income for
drinking tonight is $70?
6.
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 Fall '07
 WISSINK
 Microeconomics, Utility

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