ps3_101_2011

# ps3_101_2011 - Economics 101 Problem Set 3 Due Thursday...

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

Economics 101 Problem Set 3 Due Thursday, February 3, 2011 George J. Mailath Please indicate your recitation time/number and recitation instructor on your answer. 1. Nicholson and Snyder problem 4.2. 2. Suppose Bruce enjoys opera, and while at the opera, champagne. Not surprisingly, better seats at the opera cost more. For simplicity, sup- pose that all qualities of seats are available, with q denoting the quality of a seat. His utility function is quasilinear, of the form U ( q,c ) = log q + c, where c is his consumption of champagne. (a) If the opera charges a constant price p o per unit quality (so that a ticket of quality q costs p o q ), and champagne costs p c per (very small) glass, what is Bruce’s budget constraint (if he has I to spend)? (b) Illustrate Bruce’s budget constraint and indifference curves. (c) Suppose p o = p c = 2 and I = 3. Which ticket will Bruce buy, and how much champagne will he drink? (d) How do Bruce’s optimal choices change as his income I increases?

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern