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In: Economics

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?

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
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