posted by Anonymous on .
1.. Suppose that U(x; y) = min(x; y) with px = 1 and py = 1. Describe and
illustrate the income and substitution effects of an increase in the price of
good y. What does this imply about a tax imposed on good y..
2.. Let U(x; y) = 5x:8y:2 showing all derivation work, find:
(a) the Marshallian demand functions for x and y
(b) the Indirect Utility Function
(c) the compensated demand functions xc and yc
3….. Suppose that Timmy just graduated from college and has two job offers in two distinct
cities. Timmy gains utility from only the consumption of goods x and y and has a utility
function U(x; y) = . In City A, Timmy would earn $50 and the prices of x and
y are $42 and $12, respectively. In City B, Timmy would earn $40 and the prices of x
and y are $32 and $8, respectively. Will Timmy take the job in City A or City B and
how much utility would he gain in each city
none of the above