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ECO 303: Intermediate Microeconomic Theory Problem Set5

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Question;Question 3A consumer has utility function given by u(x1, x2) =?x1 x 2.;(i) Suppose the price of good 2 and income are?xed at $5 and $100, respectively. Find the inverse demand function for good 1.(P1 on the left hand side). Is this ordinary demand? Why?(ii) Now assume P1 and P2 are?xed at $3 and $5. What is the functional form of engle curve for both goods? Are they increasing? Why?Question 4Consider a consumer with utility function given by u(x1, x2) = x1 x2. (i) Find the demands for goods 1 and 2 when the consumer faces prices p1 and p2, and income m.(ii) Are goods 1 and 2 normal goods? Why?(iii) Are goods 1 and 2 ordinary goods? Why?

 

Paper#57439 | Written in 18-Jul-2015

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