Quiz-3-2010-1

Quiz-3-2010-1 - (c Use a graph to show the effect of the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ARE 100A Quiz on Problem Set III January 29 2010 Name……………………………. . Section……………………………. . 1. A consumer spends his income only on bread. He consumes two brands of bread, Safeway (S) and Nugget (N). Units consumed are measured by N and S. The consumer’s utility function is given by: U(N,S)= 5 ln N + 2.5 ln S. N P is given as $4 and is given as $2. The income of the consumer is given as $48. S P (a) Find the equilibrium that maximizes the consumer’s utility in the problem above. Obtain the quantities and utility level. (b) If the price of N decreases from $4 to $3, what will the new equilibrium quantities be ?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: (c) Use a graph to show the effect of the price decrease. T U R N O V E R > > 2. A romantic individual wants to increase the utility of their significant other by purchasing Wine(W) and Roses ( R) . The utility function to be maximized is U= W 0.4 R 0.6 However for romantic reasons the sum of the roses ( R ) plus four times the bottles of wine (W ) must be equal to 20. Assume that wine and roses are continuous variables and can be purchased in any fraction of quantity Solve the problem for the optimal allocation of Wine (W) and Roses ( R). Show your work....
View Full Document

This note was uploaded on 10/25/2010 for the course ARE 100A taught by Professor Constantine during the Winter '08 term at UC Davis.

Page1 / 2

Quiz-3-2010-1 - (c Use a graph to show the effect of the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online