hw2_Solution - Intermediate Microeconomics Homework Set 2:...

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Unformatted text preview: Intermediate Microeconomics Homework Set 2: Solutions Exercise 2 1. Jerry, Pat and Oral have the same preferences as Jim since their utility function are monotonic transformations of Jims. 2. Jerry, Pat, Oral, Tammy, Marjoe, and Francis have indifference curves which look like Jims, but Tammy and Francis have different preferences. 3. Franciss utility is a decreasing transformation of Jims, so he orders his indiffer- ence curves in the opposite way. Tammys utility function is a transformation of Jims but is sometimes increasing and sometimes decreasing. Exercise 4 1. u ( x 1 ,x 2 ) x 1 = 1 2 x 1 , so u (2 , 3) x 1 = 1 2 2 . 2. u ( x 1 ,x 2 ) x 2 = 1 3 x 2 3 2 , so u (3 , 2) x 1 = 1 3 2 2 3 . 21. 3. MRS ( x 1 ,x 2 ) =- u ( x 1 ,x 2 ) x 1 u ( x 1 ,x 2 ) x 2 =- 3 x 2 / 3 2 2 x 1 so MRS (2 , 2) - 1 . 7. 4. You simply have to remember that ln ( u ( x 1 ,x 2 )) x i = u ( x 1 ,x 2 ) x i u ( x 1 ,x 2 ) ....
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hw2_Solution - Intermediate Microeconomics Homework Set 2:...

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