UCLA PSYCH 10 - PS3 (2 pages)

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PS3

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Pages:
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School:
University of California, Los Angeles
Course:
Psych 10 - Introductory Psychology
Introductory Psychology Documents
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ECON 11 Problem Set 3 Due October 19 2016 before 9 30 in class Put name Last First Student ID and TA Section letter on submissions Exercise 1 Suppose that an individual with income I cares about two goods X and Y The price of the two goods is pX and pY The individual has the following utility function U X Y X 4 Y 1 a Find the Marshallian uncompensated demand for X and Y b Find the indirect utility function Exercise 2 Joseph likes roses R and tulips T equally and views them as perfect substitutes in proportion 1 to 1 The price of a rose is 4 the price of a tulip is 2 and Joseph has 20 to spend on flowers a How much of each flower will Joseph buy Hint the first order conditions will not help think about what you would do in this situation b Now suppose that the price of a tulip rises to 10 How does the consumption of Joseph change c What are the Josephs demands for roses and tulips as a function of prices and income pR pT I You will have three cases depending on the relationship between pR and pT d How much should Josephs income increase to compensate for the rise in the price of roses Hint use the indirect utility function before and after the change Exercise 3 Britney is very fashionable When she buys a new dress D she also needs to buy a hat H to match that dress and vice versa So she views the two goods as perfect complements The price of a dress is 15 the price of a hat is 10 and she has 85 to spend 1 a Write down a utility function that represents Britneys preferences over dresses and hats b How many dresses and hats is she going to consume Hint the first order conditions will not help draw the budget constraint and the indifference curves and look at the highest one that intersects the budget constraint c What is the exact value of Britneys indirect utility 2


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