econ 201 - ps2

econ 201 - ps2 - ECONOMICS 201 SPRING 2012 PROBLEM SET 2 1....

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1 ECONOMICS 201 SPRING 2012 PROBLEM SET 2 1. Cookie Monster likes chocolate cookies (good 1) and sugar cookies (good 2). His demand functions are 1 2 1 1 ) , , ( P m m P P X and 2 2 1 2 ) 1 ( ) , , ( P m m P P X , where 3 1 , 1 1 P , and 2 2 P . a. How many chocolate and sugar cookies does he consume if his income is 30? b. Graph the budget line, indifference curve, and optimal bundle in part a. c. How many chocolate and sugar cookies does he consume if his income increases to 36? d. Graph the budget line, indifference curve, and optimal bundle in part c. 2. Peter Griffin’s (Family Guy) demand function for good 1 is 1 2 1 1 2 1 2 1 1 ) , , ( P P m P m P P X . a. Using a partial derivative, show whether good 1 is normal or inferior. b. Using a partial derivative, show whether good 1 is ordinary or Giffen. (*More algebra than possible on exam.) c. Using a partial derivative, show whether goods 1 and 2 are complements or substitutes. 3.
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This note was uploaded on 02/23/2012 for the course ECON 201 taught by Professor Ninkovic during the Spring '08 term at Emory.

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econ 201 - ps2 - ECONOMICS 201 SPRING 2012 PROBLEM SET 2 1....

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