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ECON 3102  002 Fall 2010
Problem Set 1
This problem set is due Friday, October 15 at the beginning of the class. The maximum
score is 25 points.
questions
about the problem set 1.
Q1.
Consider the consumer optimization problem we have studied in class. Suppose
that the utility function is given by
U
(
C;l
) =
min
(
C;al
)
where
a
is a positive constant. Determine the optimal consumption bundle
(
C
;l
)
in terms
of
a
,
w
,
h
,
and
T
.
Hint: Optimal consumption bundle will be on the line
C
=
al
.
Q2.
Consider again the problem of the representative consumer whose preferences given
by the utility function
U
(
C;l
) =
C
l
±
where
±
and
²
are positive constants.
Determine the optimal consumption bundle
(
C
;l
)
in terms of
±
,
²
,
,
h
,
T
and
w
, i.e.
obtain the closedform solutions for
C
and
l
.
Q3.
a. Consider a representative consumer whose preferences over consumption and
leisure are given by the utility function
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This note was uploaded on 12/10/2010 for the course ECON 3101 taught by Professor Staff during the Spring '08 term at Minnesota.
 Spring '08
 Staff
 Economics

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