Quiz 7. DemandFcn2

# Quiz 7. DemandFcn2 - x 2 is fixed at p 2 = \$1 Find the...

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Shomu Banerjee ECON 201 DEMAND FUNCTION QUIZ #2 Anu’s utility function over two goods x 1 and x 2 is given to be u ( x 1 , x 2 ) = 2( x 1 ) 0.5 + 2( x 2 ) 0.5 . Her marginal utility for the first good is MU 1 = 1/( x 1 ) 0.5 while her marginal utility for the second good is MU 2 = 1/( x 2 ) 0.5 . (a) Calculate Anu’s marginal rate of substitution. ( Hint : MRS = - MU 1 / MU 2 ) (b) The price of good
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Unformatted text preview: x 2 is fixed at p 2 = \$1. Find the demand for x 1 as a function of p 1 and income m . ( Hint : Set MRS = -p 1 / p 2 and use the budget equation p 1 x 1 + p 2 x 2 = m .) (c) The price of good x 2 is fixed at p 2 = \$1. Find the demand for x 2 as a function of p 1 and income m ....
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