Microeconomics I .tw
Microeconomics I
Homework#2 Answer Key
Fall 2009
I. Multiple choice question
|1 |2 |3 |
|$10 | 3 | 7 |
|15 | 6 | 9 |
|20 |10 |10 |
(c) What is the income elasticity of hot dogs for this consumer as income increases from $10 to $15?
Ans:
4. a. See Figure 4.2
b. See Figures 4.3 and 4.4
c. ξ ’ (3/5)(10/3) ’ 2
[pic]
Figure 4.2
[pic]
Figure 4.3
[pic]
Figure 4.4
3)(Ch4 Q27,28)
Ryan has a constant elasticity of substitution (CES) utility function U=q1ρ+ q2ρ. (a)Derive his Engel curve. (b)Derive Ryan’s demand curve for q1 and q2.
Ans:
(a)
The tangency condition is
[pic]
which implies
[pic]
Substituting into the budget constraint:
[pic]
(b)
[pic]
so
[pic]
and by symmetry:
[pic]
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