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Unformatted text preview: and w a number. Consider the set G = { ( p , x ) ∈ ± K × ± K  x is optimal in B ( p , w ) } . (For some price vectors there could be more than one ( p , x ) ∈ G .) Calculate G for the case of K = 2 and preferences represented by x 1 + x 2 . Show that (in general) G is a closed set. Problem 6. ( Moderately difﬁcult ) Determine whether the following behavior patterns are consistent with the consumer model (assume K = 2 ) : a. The consumer’s demand function is x ( p , w ) = ( 2 w /( 2 p 1 + p 2 ) , w /( 2 p 1 + p 2 )) . b. He consumes up to the quantity 1 of commodity 1 and spends his excess wealth on commodity 2....
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This note was uploaded on 12/29/2011 for the course ECO 443 taught by Professor Aswa during the Fall '10 term at SUNY Stony Brook.
 Fall '10
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