ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Please answer the following 2 part question with steps 

For number 1 and 2 assume an individuals Utility function is
given by:
U(q1, q2) = q₁ q₂
1/2
1 *
1. Suppose Melissa has $14 to spend on bundle of good #1 and
good #2. If the price of good #1 is $2 (p1= 2). How much of good
#1 will be demanded of Melissa?
2. If the price of good #1 (p1) increases by 1% but income
(y) stays the same, which statement must be true?
A. The individuals total expenditure of good #1 will increase
B. The individuals total expenditure of good #1 will decrease
C. The individuals total expenditure of good #1 will remain the same
D.There is not enough information to say how the individuals expenditure on good #1
will be affected
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Transcribed Image Text:For number 1 and 2 assume an individuals Utility function is given by: U(q1, q2) = q₁ q₂ 1/2 1 * 1. Suppose Melissa has $14 to spend on bundle of good #1 and good #2. If the price of good #1 is $2 (p1= 2). How much of good #1 will be demanded of Melissa? 2. If the price of good #1 (p1) increases by 1% but income (y) stays the same, which statement must be true? A. The individuals total expenditure of good #1 will increase B. The individuals total expenditure of good #1 will decrease C. The individuals total expenditure of good #1 will remain the same D.There is not enough information to say how the individuals expenditure on good #1 will be affected
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