ajaz_204_2013_2014_HW_5

Solve the general two good ump ie derive all possible

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Unformatted text preview: e good (so that she’ll spend her entire income). Solve the ) general (two good) UMP (i.e. derive all possible scenarios and their respective conditions): ( ) ⏟ ⏟ ) ⏟ ⏟ Answer: Assuming at least one good is a “good” good: ( 9 University of Toronto, Department of Economics, ECO 204, 2013 - 2014 ( [ ) ⏟ ⏟ [ There are four scenarios when a consumer perceives at least one of the goods to be a “good” good: Propose: Propose: Check: Check: Propose: Propose: Propose: Propose: Check: Check: Check: Check: Case A Case B Case C Case D In fact, we’ll have In fact, quantity of at least one good Check when If Impossible In fact, we’ll have Case A If then: [ ⏟ ⏟ ⏟ 10 University of Toronto, Department of Economics, ECO 204, 2013 - 2014 This is a contradiction and case A cannot occur. That is, expenditure cannot be nil when you like at least one good -- you must spend all your money. Case B In this scenario, you won’t consume good 2. If [ then: ⏟ ⏟ If you don’t consume good 2 then you must spend your entire income on good 1 ...
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This homework help was uploaded on 02/15/2014 for the course E 204 taught by Professor Ajaz during the Winter '13 term at University of Toronto- Toronto.

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