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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question 3
Consider the utility function of the form: ?=?1?1?2?2
Given the budget constraint: ?1?1+?2?2=?
Show that the implied Marshallian demand

Transcribed Image Text:Question 3
Consider the utility function of the form:
a2
U = x¨*x2
Given the budget constraint:
P1X1 + P2X2 = M
Show that the implied Marshallian demand curves are:
M
X1
(a1 + a2) P1
a2
M
X1 =
(a1 + a2) P2
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- Imagine Billy eats brownies (B) and cookies (C) and considers them to be perfect substitutes. Brownies yield him four times more utility than cookies. Which of the following equations could describe his utility function? U= 0.25B + C O U=B+ 0.25C U = B'C OU = BC4 %3Darrow_forwardPlease don't use Ai solutionarrow_forwardConsider an individual with preferences represented by the following utility function: U (x1, 12) = x{x; The individual faces prices: P1 = 0.5; p2 = 1 And has income: M = 250 If the price of good one increases to p1 =1 For this change in price, mark all of the following answers that are correct. (EV = equivalent variation; CV = compensating variation) O In absolute value, EV is greater than Cv O In absolute values, change in Consumer surplus is smaller than CV. O In absolute value, CV is greater than EV In absolute values, change in Consumer Surplus is smaller than EV. There is not enough information to determine an answer.arrow_forward
- Derive Ryan's demand function for q₁, given his utility function is where o = = (9₁) P + (9₂)P, 1 1-p The demand curve for q₁ as a function of P₁, P2, and Y is (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a subscript can be created with the_ 9₁ = character.) U= Let the price of q₁ be p₁, let the price of q2 be p2, and let income be Y.arrow_forwardGiven the following utility function: and marginal utilities: A consumer facing the following prices: chooses to consume: U = 2X + 2Y Assume that graphically good X is on the horizontal axis and good Y is on the vertical axis. Given this consumption bundle, the marginal rate of substitution is equal to - Given this value, the consumer should consume MU, = 2, MU, = 2 P, = $2, P, =5 15 units of good X and 19 units of good Y. (Round your answer to two decimal places. Note that the minus sign is already included). in order to maximize his/her utility.arrow_forward
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