HW2 - Home Work 2 Consumer Behavior(Due on Wed 23 Oct 2013...

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Page 1 of 2 Home Work 2 Consumer Behavior (Due on Wed, 23 Oct, 2013) Choice 1.Let 𝑢(𝑥1, 𝑥2) = 𝑥12+ 𝑥2, ?1= 4, ?2= 2 𝑎𝑛𝑑 𝑀 = 100.Find the optimal values of x1and x2. 2. Joseph has the utility function U(F,H) = 10F 2 H, where F is the quantity of food he consumes per year and H is the quantity of housing per week. Suppose the price of food is $10 and the price of housing is $5, while Joseph has an income of $150/week. (a) Calculate Joseph's MRS as a function of the quantities F and H. (b) Write out Joseph's constrained optimization problem with the information provided. (c) Using the Lagrange method, solve for Joseph's optimal consumption bundle of food and housing. 3. Connie has a monthly income of $200 which she allocates between 2 goods meat and potatoes. a. Meat costs $4 per pound and potatoes cost $2 per pound. Draw her budget constraint. b. Suppose her utility function is given by the equation U(M,P) = 2M + P. What combination of meat and potatoes should she buy to maximize her utility?
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  • Winter '07
  • JUZWIAK,WILLIAM
  • Utility, Engel Curve, axis Good Y., ???????????? ????

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