400ps8-11 - ECON 400 Winter 2011 Problem Set VIII(for...

This preview shows page 1 out of 1 page.

ECON 400 Hartman Winter 2011 Problem Set VIII (for Wednesday, March 2) 1. A person's preferences over two goods can be represented by the utility function ( , ) a b U x y x y where 0 a and 0 b are given parameters and 0 x and 0 y denote the quantities of the two goods. Let p and s denote the prices of goods x and y , respectively, and let M denotes the individual's wealth. a. Solve for the individual's Marshallian demand functions for the two goods, * ( , , ) x x p s M and * ( , , ) y y p s M . Hint: * x does not depend on s , and * y does not depend on p . b. Verify that these demand functions are homogeneous of degree zero in ( , , ) p s M . c. Let ij denote the elasticity of demand for good , i x y with respect to price , j p s , and let iM denote the elasticity of demand for good i with respect to income. (i) Verify that 0 xp xs xM     and that 0 yp ys yM     . (ii) Verify that 0 xp yp px sy px M M M , that 0 xs ys px sy sy M M M , and that 1 xM yM px sy
Image of page 1
  • Fall '08
  • Ellis,G
  • Economics, Utility, demand functions, Hicksian demand function, Hicksian, M M M M M M M

What students are saying

  • Left Quote Icon

    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.

    Student Picture

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

  • Left Quote Icon

    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.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    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.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern