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Quiz for ECO 3306 - Intermediate Microeconomic Analysis with North at Baylor (BU)

Quiz Information

Material Type:Quiz 2
Professor:North
Class:ECO 3306 - Intermediate Microeconomic Analysis
Subject:Economics
University:Baylor University
Term:Spring 2003
Keywords:
  • Entertainment
  • Unit Elastic
  • Demand Function
  • Provided That
  • Behind (of)
  • Consumption
  • State of Nature
  • Preferences
  • Interesting
  • (to/for) Him/it
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Sample Document Text

ECO 3306 Name: Spring 2003 Dr. Charles M. North QUIZ 2 (Chapters 8, 12, and 15) Answer the following questions in the space provided. SHOW ALL WORK! 1. (6 points) A consumer whose preferences are represented by the utility function },2min{),( 2121 xxxxu = has demand functions 21 211 2),,(* pp mmppx += and 21212 2 2),,(* pp mmppx += . Suppose that m = 60 and 32 =p . If the price of good 1 falls from 41 =p to 21 =′p , what are the substitution and income effects of the price change on consumption of good 1? Briefly explain the economic intuition behind your answer. 2. (3 points each) The Cobb-Douglas utility function aaxxxxu −= 12121 ),( , 0 < a <1, yields a demand function for good 1 of 1 211 ),,(* p ammppx = . a. Show that this demand function has a unit elastic price elasticity of demand. b. Show that this demand function has a unit elastic income elasticity of demand. 3. Bill and Ted enj...

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