Problem Set 3

# Problem Set 3 - UCLA Economics 11 Fall 2010 Professor...

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UCLA Economics 11 – Fall 2010 Professor Mazzocco Problem Set 3 Due by October 21 before 9:00am in the box located outside room 2221E, Bunche Hall 1) Suppose that an individual with income I cares about two goods, X and Y. The price of the two goods is P X and P Y . The individual has the following utility function: U(X,Y) = X (1 + Y) a) Find the Marshallian (uncompensated) demand for X and Y. Are X and Y normal or inferior goods? b) Find the Hicksian (compensated) demand for X and Y. c) What is the minimum expenditure necessary to achieve a utility level of U= 72 with Px=4 and P Y =2? 2) Angelina lives in a bizarre world. In her world, you buy shoes for your left and right feet individually – not as a pair. Angelina has two feet though, and she doesn’t want different amounts of left and right foot shoes – she views left foot shoes and right foot shoes as perfect complements. The price of a left foot shoe is \$15 and the price of a right foot shoe is \$10. Angelina has \$75 to spend.

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## This note was uploaded on 11/09/2011 for the course ECON 11 taught by Professor Cunningham during the Fall '08 term at UCLA.

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Problem Set 3 - UCLA Economics 11 Fall 2010 Professor...

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