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Unformatted text preview: a. Write Andreas budget constraint assuming there are 24 hours in a day. (Hint: labor hours are hours not spent on leisure, so leisure plus labor equal 24). b. Derive Andreas demand for leisure and consumption. c. What is her labor supply N? d. Answer a. and b. if Andreas has non labor income of $100 per day. 4. For the Constant Elasticity of Substitution (CES) utility function derive the optimal quantity demanded of q 1 and q 2 as a function of their prices and income using the Lagrangian method. Hint: look at problems 32, 37, and 38 in the textbook. 5. Suppose a person's utility for goods x and y is given by u(x,y) = x a y b . a. Compute the demand functions for goods x and y. b. Compute the effect on each demand of a change in the price of the other good. c. Are these two goods complements or substitutes? Explain your answer. d. Compute the effect on each demand of a change in income. e. Are these two goods normal or inferior? Explain your answer....
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This note was uploaded on 03/10/2012 for the course ECON 1100 taught by Professor Unver during the Fall '06 term at Pittsburgh.
 Fall '06
 Unver
 Microeconomics, Utility

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