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Problem Set 2
1.
Clara’s utility function is U(X,Y) = (X+2) (Y+1), where X is her consumption of good X and Y is
her consumption of good Y.
a.
Write an equation for Clara’s utility indifference curve that goes through the point (X,Y) =
(2,8).
b.
Suppose the price of each good is 1 and that Clara has an income of 11. Write an equation for
Clara’s budget constraint. Can Clara achieve a utility of 36 with this budget?
c.
With a budget equation given by (b), what utility maximizing bundle will Clara choose?
2.
Allan has a utility function U(x
1
,
x
2
) = 4 √x
1
+ x
2
, where x
1
is the consumption of nuts and x
2
is the
consumption of berries.
a.
What utility does the commodity bundle (25,0) give him?
b.
Suppose that the price of a unit of nuts is 1, the price of a unit of berries is 2, and Allan’s
income is 24. How many units of nuts does he choose to buy? How many units of berries?
c.
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 Spring '09
 Dean
 Utility

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