10fB_ps09

# 10fB_ps09 - Microeconomics ECON 100A Problem Set 9 Due Dec...

This preview shows pages 1–2. Sign up to view the full content.

Microeconomics ECON 100A Problem Set 9 Due Dec 1, 2010 (Solutions Posted Dec 3, 2010) 1. (This question is from a practice final) Ralph consumes only two goods, potatoes (good 1) and yams (good 2). He is not as particular with his portion sizes and has a utility function given by 2 1 2 1 ) , ( q q q q U = , where q 1 is the number of potatoes and q 2 is the number of yams he consumes in a day. He wishes to maximize utility. The price of a potato is p 1 and the price of a yam is p 2 . Ralph owns a farm that produces only potatoes and yams and selling these crops are Ralph’s only source of income. Therefore his income, which depends on the prices of potatoes and yams and on Ralph’s endowment of potatoes and yams, is given by Y = p 1 q 1 0 +p 2 q 2 0 , where q 1 0 is Ralph’s endowment of potatoes (i.e. what he harvests) and q 2 0 is his endowment of yams (i.e. what he harvests). a. (5) Solve for Ralph’s Marshallian demand function for potatoes and his Marshallian demand function for yams. Your solution should be a function only of prices and endowments. However, if you prefer, you may still use the notation “Y” in place of p 1 q 1 0 +p 2 q 2 0 to keep the equations clean. If you do this, though, don’t forget that Y is still a function of prices, that will matter! Also solve for the indirect utility function. b. (5) Solve for Ralph’s Hicksian demand function for potatoes and his Hicksian demand function for yams.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• 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.

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

• 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.

Dana University of Pennsylvania ‘17, Course Hero Intern

• 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.

Jill Tulane University ‘16, Course Hero Intern