Part A – Consumer Theory 1) Imagine a hospital who is a consumer of medical masks...

Part A – Consumer Theory

1) Imagine a hospital who is a consumer of medical masks (x) and ventilators (y). The hospital administrator in charge of purchasing these has the following utility function:

U (x,y) = x2 + y

e. What is the Marshallian Demand function for ventilators?

f. What is the Hicksian Demand function for medical masks?

g. What is the Hicksian Demand function for ventilators?

h. Economically, how are the Marshallian and Hicksian demand functions different?

i. What is the income elasticity of ventilators? What does this mean economically? Are ventilators a normal or inferior good?

j. What is the cross-price elasticity of medical masks? What does this mean economically? Are medical masks and ventilators net complements, substituted, unrelated according to this?

Expert Solution

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