MICROECONOMICS

Chapter 4 C1. Consider the utility function u(X1, X2) = VX1X2. (a) What kind of preferences does it represent? (b) Is the function v(X], X2) = x X2 a monotonic transformation of u(X1, X2)? { Hint: Use the MRS to prove monotonicity} (c) Is the function w(X1, X2) = xixz a monotonic transformation of u(X1, X2)? {Hint: Use the MRS to prove monotonicity} [5] C2. A consumer has a Cobb-Douglas utility function U(X1, X2 ) = x1x2 Use the logarithmic form of the Lagrangian multiplier method to derive the Marshallian ordinary demand for both goods. [8]