Dokuz Eyll University
Faculty of Business
Department of Business Administration
Fall 2016
PROBLEM SET I
1) A vegetable fiber is traded in a competitive world market, and the world price is $9 per
pound. Unlimite
Sample True/False or Multiple Choice Questions:
1. If you have an income of $18 to spend, if commodity 1 costs $3 per unit, and if
commodity 2 costs $9 per unit, then the equation for your budget line can be written
as
a.
x1/3 + x2/9 = 18.
b.
(x1 + x2)/12
Dokuz Eyll University
Faculty of Business
Department of Business Administration
Fall 2016
PROBLEM SET I
1) A vegetable fiber is traded in a competitive world market, and the world price is $9 per
pound. Unlimite
1. Quasilinear Preferences and Consumption
Suppose that
u (x1, x2, x3) = A x1 + x21/2 + ln (x3), where A is a positive constant.
(a) What must be true of prices (p1, p2, p3), wealth W, and the parameter A for the consumer to
purchase positive quantities o
Solutions to Problem Set 3
1. Quasilinear Preferences and Consumption
u ( x1 , x2 , x3 ) Ax1 x21/ 2 ln x3
a) Suppose the consumer purchases positive quantities of all goods, then in the
optimum, the following relation must hold:
A
1
1
p1 2 p2 x2* p3 x3*
Economics 2020a / Kennedy School API-111
Microeconomic Theory
Problem Set #3
Due Date: October 8, 2008
1. Quasilinear Preferences and Consumption
Suppose that
u (x1, x2, x3) = A x1 + x21/2 + ln (x3), where A is a positive constant.
(a) What must be true o
DOKUZ EYLL NVERSTES REKTRL
YP KOORDNATRLNE
Yksekretim Kurulu Bakanl tarafndan ilan edilen retim yesi Yetitirme
Program (YP) kapsamnda
niversitesiFakltesi
Anabilim Dalna aratrma grevlisi olarak . tarihinde atandm.
Yksekretim Kurulu Bakanl tarafndan nivers
1) MeasuresofRiskAversion
a)
rA = -u/u
rR = -x * u/u = x * rA
i. u(x) = -e-x
rA = -(-e-x / e-x) = 1
rR = x * rA = x
ii. u(x) = ln x
u(x) = e-x
u(x) = -e-x
* so this is CARA (constant absolute risk aversion)
* so this is increasing relative risk aversion
u