Download Microeconomics Problem Set: Utility and Choice - Prof. Lise Duedal Vesterlund and more Assignments Microeconomics in PDF only on Docsity!
Econ 1100 Name:________________ Professor Lise Vesterlund Group members:
Problem Set 3
Due September 25
Ch. 4 Utility and Ch. 5 Choice Problem 1: Beyonce only cares about the amount of Pepsi that she drinks. Pepsi either comes in a six pack (x 6 ) or in a case (x 24 ). A case has 24 cans of soda.
a) Draw Beyonce’s budget line when her soda budget is $30 and the price of a case is (p 24 ) is $ and the price of a six pack (p 6 ) is $
Case
26
22
18
14
10
6
2
2 6 10 14 18 22 26 30 34 38 Six pack
b) How many six packs and cases does Beyonce buy when m=30, p 24 =3, and p 6 =1?
c) Draw a picture of her indifference curve through her utility maximizing bundle.
Problem 2: Phoebe likes spending time at Central Perk. While at Central Perk she always wants two scones (xS ) for every one cup of coffee (xC).
a) Draw Phoebe’s budget line when her Central Perk budget is $20, and the price of a scone is $ and the price of a cup of coffee is $
xS
13
11
9
7
5
3
1
1 3 5 7 9 11 13 15 17 19 xC
b) How many scones and cups of coffee does she buy when m=20, pS =1, and p (^) C=2?
c) Draw a picture of the indifference curve where she maximizes utility.
f) How many slices of meatloaf and how many pickles does she buy when m=32, p (^) M =2, and pP =1? Be sure to derive the demand step by step.
g) Derive her demand function for arbitrary prices (pP , pM ) and income m (be sure to do it step by step).
Problem 4: Suppose we observe an individual’s consumption of x and y over three periods. In all periods his income is $100, in the first period px = 1 and py = 1 , in the second period px = 2 and py = 1, and in the third period px = 1 and py = 2. In the first period he consumes (x, y)= (50,50) , in the second period he consumes (x, y)= (33,33), and in the third period (x, y)= (33,33). What do you think his utility function might look like?
Problem 5: Suppose we observe an individual’s consumption of x and y over three periods. In all periods his income is $100, in the first period p (^) x = 1 and py = 1 , in the second period px = 2 and py = 1, and in the third period px = 1 and py = 2. In the first period he consumes (x, y)= (100,0) , in the second period he consumes (x, y)= (40,20), and in the third period (x, y)= (100,0). What do you think his utility function might look like?
Problem 6: Suppose we observe an individual’s consumption of x and y over three periods. In all periods his income is $100, in the first period p (^) x = 1 and py = 1 , in the second period px = 2 and py = 1, and in the third period px = 1 and py = 2. In the first period he consumes (x, y)= (60,40) , in the second period he consumes (x, y)= (30,40), and in the third period (x, y)= (60,20). What do you think his utility function might look like?
