Question: The utility function for an individual is given by (1, 2 ) = 1 2 , and the budget constraint is 11 + 22 =

The utility function for an individual is given by (1, 2 ) = 1 2 , and the budget constraint is 11 + 22 = .

(i) Derive the marginal rate of substitution (MRS) between 1 and 2. Hence find the MRS when = 1 2 , = 2 3 , = 3 2 .

(ii) Derive expressions for the optimal choices for 1 and 2. Hence calculate the optimal values for 1 and 2 when 1 = 2, 2 = 3, = 39. (The values of A, a and b are already provided in (i) above.)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

303Micro, help. 6. A firm in a competitive output market is unsure of what the ultimate product price will be at the time she has to make her output decision. She believes that with probability .5...

Questions: d. (6 points) Imagine that I=$1000, px=py=$1. What is the maximum income tax the government could impose if they didn't want to reduce consumer utility by more than half? 4. Uncertainty...

Exercise 6 Consider a two-period intertemporal model, where the representative agent has a utility function given by U1 5 C12 1 1 2 1 C12 2 1 2 ; where Ct in consumption for the period t; . 0 is...

Suppose that you know the utility function for an individual is given by the equation U = XY where U is the total amount of utility the individual gets when they consume good X (X) and good Y (Y)....

This question is very similar to Question #1 but recasts the problem in terms of a single type of good consumed over time instead of two different types of goods within the same period of time....

1. Solve for the two-period consumer optimization problem when the utility function is given as U (C1, C2) = CfC21_\" and the intertemporal budget constraint is given as C1 + C Y 2 S Y1 + 2. 1+?"...

Economics calculation d. (8 points) Using the Slutsky decomposition, calculate the substitution and income effects for the price change in part (d). Again, express your answer in terms of price(s)...

question on the pic 4 An intertemporal household problem with power utility In the previous set of practice problems, we considered an intertemporal problem of a household with preferences...

Consider the problem of an individual that has Y dollars to spend on consuming over two periods. Let cl denote the amount of consumption that the individual would like to purchase in period 1 and (:2...

1 . Suppose a consumer has a utility function such that U = xy / ( x + y ) which is subject to a traditional budget constraint. Given this information, proceed to the questions below to solve the...

Assume the following information: Milling Department Beginning work in process Inventory Units started into production during March Units completed during the period and transferred to the next...

Find the transmission parameters for the circuit in Fig. 19.101. 41 2

Leverage is found by multiplying debt and equity. Group of answer choices True False

Mountaineer Excavation operates in a low-lying area that is subject to heavy rains and flooding. Because of this, Mountaineer purchases one year of flood insurance in advance on March 1, paying...

In its May 31, 2017 annual report, Maloneck Ltd. (Maloneck) reported that it had inventory of $175,000 and accounts payable of $104,000 on May 31, 2016, and inventory of $196,000 and accounts payable...

At the beginning of May, Golden Gopher Company reports a balance in Supplies of $500. On May 15, Golden Gopher purchases an additional $3,300 of supplies for cash. By the end of May, only $300 of...

According to the National Association of Home Builders, the mean price of an existing single-family home in 2009 was $218,600. A real estate broker believes that because of the recent credit crunch,...

At the beginning of May, Golden Gopher Company reports a balance in Supplies of $400. On May 15, Golden Gopher purchases an additional $2,300 of supplies for cash. By the end of May, only $200 of...

Write a program to wish happy birthday to a student. Firstly, take today month and day as an input and secondly take birthday as an input in the form of month and day. If the input day and month...

10. First test yourself and then let another member of the group test you in relation to the following questions. If deviations occur, discuss why this might be. What can the results of this test be...

5. Based on your desired future, answer the following questions: (a) What do you want, i.e. what goals have you set yourself? Set up three goals in order of priority. (b) Why do you want this? (c)...

1. Discuss the following statements: (a) Its what you are best at that will be your downfall. (b) How can we learn but not learn? (c) Learning to see is different from seeing. (d) Creativity is...