w10_ps3_econ100

w10_ps3_econ100 - Problem Set 3 Economics 100, Winter 2010...

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Problem Set 3 Economics 100, Winter 2010 Due January 28, 2010, 9 AM 1. A consumer has a utility function for food (F) and clothing (C) given by: U(F,C) = FC + F His total income is $200. The price of food is $1 (per pound) and the price of clothing is $2 (per item). a. Find the marginal utility of food, the marginal utility of clothing, and the marginal rate of substitution of food for clothing. b. Calculate the quantity of food and clothing this consumer will choose if he maximizes utility. c. Suppose the price of clothing falls to $1. Calculate the new quantities of food and clothing this consumer will choose if he maximizes utility. d. Are food and clothing complements or substitutes for this consumer? Explain your answer. 2. Tom allocates his total income for technology (I) between purchases of computers and purchases of software. Computers (C) and software (S) are complements in consumption. The price of computers is Pc and the price of software is Ps.
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w10_ps3_econ100 - Problem Set 3 Economics 100, Winter 2010...

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