ECON-500: Microeconomic Analysis and Policy
ECON 500 Problem Set 02
Suppose that U(x, y) = x + ln(y) (defined for positive values of x and y). Let px, py, and I respectively denote the prices of Goods X and Y, and income (such that all three parameters are positive, as usual).
Question 1. [2 points]
Evaluate the ratio
Question 2. [2 points]
Evaluate the ratio
Question 3. [2 points]
Evaluate esx,px.
Question 4. [2 points]
Suppose that the utility function is U(x, y) = x
αy
1−α, where the domain of the utility function comprises bundles with strictly positive amounts of goods X and Y, and 0 < α < 1.
Let px, py and I respectively denote the prices of Goods X and Y, and income. This problem considers how consumer welfare changes when px increases from 1 to 2 (1/α) (and py and I do not change).
For this increase in px from 1 to 2
(1/α), evaluate
Question 5. [2 points]
Suppose that the utility function is U(x, y) = α ln(x) + (1 − α)y where the domain of the utility function comprises bundles with strictly positive amounts of goods X and Y, and .0 < α < 1
Let px, py, and I respectively denote the prices of Goods X and Y, and income.
Determine