UCLA ECON 11 - ex1sol (12 pages)

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ex1sol



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ex1sol

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Pages:
12
School:
University of California, Los Angeles
Course:
Econ 11 - Microeconomic Theory
Microeconomic Theory Documents

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Economics 11 Byeong Hyeon Jeong Answer for the first extra exercises 5 Assign a greater number for the one you like more If you are indifferent assign the same number Make sure the numbers are consistent across the choices so that the transitivity is not violated 6 U px1 x2 q x1 x2 is an example of Cobb Douglas utility function Following the notation in the textbook U px1 x2 q xc1 xd2 is the general form of Cobb Douglas utility function and in this case c d 1 The preference represented by Cobb Douglas utility function is well behaved b c and d represent the same preference as U px1 x2 q x1 x2 as each of them is a positive monotonic transformation of another 7 a Note that the utility function given here is a positive monotonic transformation of x1 x2 which represents perfect substitutes preference x2 4 2 utility 4 utility 16 x1 b This is an example of perfect complements October 15 2016 1 Economics 11 Byeong Hyeon Jeong x2 utility 2 utility 1 x1 c x1 does not affect the utility at all thus x1 is neutral x2 3 utility 3 1 utiilty 1 x1 d This is an example of quasi linear utility functions x2 utility 2 5 utility 1 5 x1 October 15 2016 2 Scanned by CamScanner Scanned by CamScanner Exercise 1 Preference and Utility



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