Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 5, Problem 5CP
To determine
Explain Person N’s marginal rate of substitution for MRSCF, values of PF is her best choice an inferior solution, and the price of the boundary choice.
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[5.5CP]Natasha's utility function is U(C, F) = (3 + F)VC, where C stands for concert tickets and
F stands for film tickets. Her income is $300 per month and concert tickets cost $5 each.
What is the formula for Natasha's MRSCF? Does it have the declining MRS property?
Solve for and graph her price-consumption curve (allowing the price of film tickets, PF,
to vary) and her demand curve for film tickets. For what values of Pf is her best choice
an interior solution? For what prices is it a boundary choice?
Joyce drinks both coffee (x) and tea (y). Her preferences over these two goods can be represented by the utility function U(x,y) =x + 3y^1/2 where x represents the number of pounds of coffee and y represents the number of cups of tea.
a) Given her preferences, find her demand functions for coffee (x) and tea (y).
b) Suppose that the price of a pound of coffee is $4 and that she has $56 to spend on coffee and tea. Write her demand curve for tea. Illustrate her demand curve.
c) Suppose that the price of a cup of tea is $1 (the price of coffee and income remain $4 and $56, resp.). Use your demand functions to find her best bundle. In an indifference curve diagram illustrate her best bundle at these prices. For the remainder of the question, assume that her income rises to $60 and that the prices of coffee and tea are unchanged at = $4 and =1.
Rui's utility function is
Let the price of good X be px, the price of good Z be normalized to $1.00, and U be her level of well-being.
What is her expenditure function?
Rui's expenditure function (E) is
E = 2.
U=X+4XZ+Z.
PX(U+0.25)
2
- 0.25 (Px +1) · (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 _ character.)
Derive her unco pensated demand curve for X. Let Y be her income.
Rui's uncompensated demand curve for good X is
(Properly format your expression using the tools in the palette.)
X=
Chapter 5 Solutions
Microeconomics
Ch. 5 - Prob. 1DQCh. 5 - Prob. 2DQCh. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6P
Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 1CPCh. 5 - Prob. 2CPCh. 5 - Prob. 3CPCh. 5 - Prob. 4CPCh. 5 - Prob. 5CPCh. 5 - Prob. 6CPCh. 5 - Prob. 7CPCh. 5 - Prob. 8CP
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