{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# ps2 - ECO 310 Fall 2007 Problem Set 2 Consumer Theory Due...

This preview shows pages 1–2. Sign up to view the full content.

ECO 310, Fall 2007 Problem Set 2: Consumer Theory Due in class on October 9 Question 1 You have just emerged from medical school with a debt service burden of \$25,000 per year, and have set up practice. You have to decide how hard to work. For each hour of work, you expect to earn \$50 (after subtracting expenses of maintaining your oﬃce, taxes, etc.). Your utility function for a full year is U ( I,H )=ln I + 2 ln(5000 H ) , where H is the number of hours you work during the year, and I is what is left of your annual income after expenses, taxes, and debt service. (a) What is your budget constraint linking I and H ? (b) Find your optimal number of hours of work. (c) If taxes go up so you are left with only \$40 per hour of work, will you work more or fewer hours? Explain the economic intuition for the result. Question 2 There are two goods, whose quantities are denoted by X and Y , each being a real number. An individual’s consumption set consists of all ( X, Y ) such that X 0 and

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

ps2 - ECO 310 Fall 2007 Problem Set 2 Consumer Theory Due...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online