Unformatted text preview: MRS and the Marshallian demand functions for the following utility functions: (a) Perfect substitutes u ( x 1 ,x 2 ) = αx 1 + βx 2 , where α > 0 and β > 0; (b) Perfect complements: u ( x 1 ,x 2 ) = min { αx 1 ,βx 2 } , where α > 0 and β > 0. 4. (JR 1.21) We have noted that u ( x ) is invariant to positive monotonic transformation. One common transformation is the logarithmic transform, ln( u ( x )). Take the logarithmic transform of the CobbDouglas utility function; then using that as the utility function, derive the Marshallian demand functions and verify that they are identical to those derived in class. 5. (JR 1.27). A consumer of two goods faces positive prices and has a positive income. Her utility function is u ( x 1 ,x 2 ) = max { ax 1 ,ax 2 } + min { x 1 ,x 2 } , where 0 < a < 1 . Derive the Marshallian demand functions. 1...
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This note was uploaded on 10/20/2010 for the course ECON 6202 taught by Professor Shapiro during the Fall '09 term at UNC Charlotte.
 Fall '09
 SHAPIRO
 Utility

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