Intermediate Microeconomics: A Modern Approach, Seventh Edition

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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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problem3 301 f07 - Econ 301 F07 PROBLEM SET 3 - due in...

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