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Unformatted text preview: Intermediate Microeconomics, 2010 Problem Set 4: Homework due: Mon/Tue 25/26 1. (From Perlo , Chapter 3, Question 4.) Miguel considers tickets to the Houston Grand Opera and Houston Astros baseball games to be perfect substitutes. Show his preference map. What is his utility function? 2. (From Perlo , Chapter 3, Question 10.) What happens to a consumer’s optimal choice of goods if all prices and income double? (Hint: What happens to the intercepts of the budget contraint?) 3. Look at the following utility functions. They are similar to the ones on the last problem set. We will work with some of these utility functions a lot, so it is worthwhile for you to become familiar with them. (a) Write down the equation for the budget line and graph the budget line. Be sure to label the intercepts and compute the slope. (b) Use the substitution method to write utility as the function of just one good. (You can substitute out the other good by using the budget constraint)....
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- Spring '08