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UCLA ECON 11 - ex1sol

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ex1part1Image (152)Image (153)Image (154)Image (155)Image (156)ex1part2ex1part3ex1part4ex1part5Economics 11 Byeong-Hyeon JeongAnswer 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 sur e the numbers are consistent across the choices s o that the transitivity is not violated.6.Upx1, x2q “ x1x2is an example of Cobb-Douglas utility function. Following the notation in thetextbook, U px1, x2q “ xc1xd2is the general form of C ob b-Douglas utility function, and in this casec “ d “ 1. The preference represented by Cobb-Douglas utility function is well-behaved.(b),(c), and (d) represent the same preference as U px1, x2q “ x1x2as each of them is a positivemonotonic transformation of another.7.(a)Note that the utility function given here is a positive monotonic transformation of x1` x2, whichrepresents perfect substitutes preference.x1x224utility“ 16utility“ 4(b)This is an example of perf ect complements.October 15, 2016 1Economics 11 Byeong-Hyeon Jeongx1x2utility“ 1utility“ 2(c)x1does not affect the utility at all, thus x1is neutral.x1x213utility“ 3utiilty“ 1(d)This is an example of quasi-linear utility functions.x1x2utility“ 2.5utility“ 1.5October 15, 2016 2Scanned by CamScannerScanned by CamScannerExercise 1 Preference and Utility


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