5. Adam's utility function is U = A B'2 where A, B represent the number of...
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5. Adam's utility function is U = A"" B'2 where A, B represent the number of apples and bananas respectively that he consumes. 1/2 1/2 (a) Find Adam's compensated demand functions. (b) Write down Adam's ordinary demand functions (you don't need to derive them). Suppose Adam's income is $100 and the prices of the goods are p, =$2 and p, =$5. How much A and B would Adam buy? (c) Suppose p, rises to $5. How much A would Adam buy now? What if his income were compensated to keep his utility constant? By using your answers to these questions, plot the ordinary and demand curves for A on the same graph. (d) Find the compensating and equivalent variations of this price change. 5. Adam's utility function is U = A"" B'2 where A, B represent the number of apples and bananas respectively that he consumes. 1/2 1/2 (a) Find Adam's compensated demand functions. (b) Write down Adam's ordinary demand functions (you don't need to derive them). Suppose Adam's income is $100 and the prices of the goods are p, =$2 and p, =$5. How much A and B would Adam buy? (c) Suppose p, rises to $5. How much A would Adam buy now? What if his income were compensated to keep his utility constant? By using your answers to these questions, plot the ordinary and demand curves for A on the same graph. (d) Find the compensating and equivalent variations of this price change.
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College Mathematics for Business Economics Life Sciences and Social Sciences
ISBN: 978-0321614001
12th edition
Authors: Raymond A. Barnett, Michael R. Ziegler, Karl E. Byleen
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