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Unformatted text preview: up to have the same level of utility as if the price had changed? Question 2) Mr Macleod likes to drink wine. He has the option to consume two different products, 1 liter of red wine (X) or 1.6 liters of white wine (Y). X and Y are perfect substitutes. Each liter of wine gives Mr Macleod 1 unit of utility. a) Write Mr Macleod utility function. b) Suppose that Px=5. Calculate the Marshallian demand for Y. Draw a graph for this demand (Y as function of Py). c) Now suppose that initially Px=5 and Py=10. But then the price of y changes to $7. Calculate the total change in demand for y. Explain your result. Question 3) The preferences of an individual are represented by the following utility function: U(x,y)= ln(x)+ 2y a) Determine if x and y are gross substitutes or gross complements. b) Determine if x and y are net substitutes or net complements....
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- Fall '08
- Utility, following utility function, Hicksian demand function, Mr Macleod, Ms Ramirez