PS1 - University of Illinois FIN 501, Financial Economics...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
University of Illinois Professor Miller FIN 501, Financial Economics Fall, 2010 Problem Set #1 Due Wednesday, September 2 (Late problem sets will NOT be accepted) 1. The article “High gas prices cut driving for 8 th month: government” (Reuters, Aug. 13, 2008; http://www.reuters.com/article/idUSN1333749120080813 ) discusses changes in quantity of gasoline demanded by consumers in response to rapidly rising prices. Consider a representative individual who receives utility from units of food (F) and gasoline (G). The individual’s utility function is U(F,G) = F G. a. Graph the indifference curve associated with this utility function when U(F,G) = 4000. Specifically, for each of the following values of F: 20, 40, 60, 80, 100 and 200, solve for the corresponding value of G that would keep the consumer on the U=4000 indifference curve. (Results may include fractional amounts.) Plot these points and connect them with a smoothed line. Please label all axes clearly. (You may prefer to do this with a spreadsheet program).
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

PS1 - University of Illinois FIN 501, Financial Economics...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online