HWK3 - 0.5*Z = 0.75*B Z = 1.5*B dU/dL = 40 - 2*(1.5*B) - B...

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--Date: February 25, 2010 --ECON - 2010 --HWK 3 --Declarations Let U = Utility Let Z = Pizza Let B = Beer Let L = Lambda U = 0.75*ln(Z) + 0.25*ln(B) -- Utility function 2*Z + B = 40 -- Budget Constraint U = 0.75*ln(Z) + 0.25*ln(B) + L[40 - 2*Z - B] -- Final Function dU/dZ = 0.75/Z -2*L dU/dB = 0.25/B - L dU/dL = 40 - 2*Z - B 0.75/Z = 0.5/B -- Equate dU/dZ and dU/DB
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Unformatted text preview: 0.5*Z = 0.75*B Z = 1.5*B dU/dL = 40 - 2*(1.5*B) - B = 0 -- Substitute into dU/dL 40 - 3*B - B = 0 40 - 4*B = 0 B = 10 Z = 15-- The typical RPI student consumes 10 pizzas and 15 beers weekly. Oh my!--------------------------------------------------------------------------||EXTRA CREDIT|| B = 40 - 15 / price_beer-- Demand curve...
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This note was uploaded on 10/22/2011 for the course ECON 2010 taught by Professor Devkota during the Spring '08 term at Rensselaer Polytechnic Institute.

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