Suppose ?(?, ?) = ?3? a) (3 pts) Write down the formula and calculate the marginal...

Suppose ?(?, ?) = ?3?

a) (3 pts) Write down the formula and calculate the marginal rate of substitution (MRS) of X for Y.

b) (1 pts) Denote the price for good X is ? , the price for good Y is ? , and income is I.?? Write down the budget constraint.

c) (5 pts) Derive the individual demand for good X and good Y as a function of prices and income. (hint: solve the utility maximization problem)

d) (2 pts) Explain the following statement: Individual demand function is homogeneous of degree 0 with respect to prices and income.

e) (2 pts) Verify the homogeneity property with your demand functions derived in part d).

f) (4 pts) Now suppose ? = 3, ? = 4, ? = 100. Find the optimal consumption bundle. ??

g) (2 pts) Show whether or not the consumer can afford the bundle (15, 20).

h) (2 pts) What is the maximum utility level?

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Expert Solution

Rahul Sunny answered 1 year ago

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