301prob1 - ECON 301 Professor S Severinov PROBLEM SET 1 Due...

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ECON 301 Professor S. Severinov PROBLEM SET 1 Due: January 21 in class (by 1:45pm) (Late Problem Sets will not be accepted) 1. Exercise 1, Ch.1 (p18.) 2. Review Question 9, Ch2. (p. 62) 3. Review Question 11, Ch2. (p. 62) 4. Exercise 1, Ch 2. (p.62) 5. Exercise 14, Ch. 3 (p.109) 6. Exercise 16, Ch. 3 (p. 109) 7. Suppose that Colin’s preferences for goods X and Y can be represented by the utility function U ( x , y )=min{ x , y }, where x (respectively, y ) is the amount of X (respectively, Y ) that he consumes. min{ x , y } is a function that gives the minimum of the two numbers x and y . For example, min{3,5}=3, min{4,2}=2, and min{1,1}=1. a) Give a real world example for such preferences and for goods X and Y . b) Draw the indifference curve along which Colin has a utility of 4. c) Suppose that the price of both X and Y is $1, and Colin’s income is $12. What is his optimal consumption bundle? What if the price of X is $1 and the price of Y is $2? d)
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