Question

Given a utility function for perfect complements: U(x1,x2) = min{x1,βx2}, where β is a positive num-...

Given a utility function for perfect complements: U(x1,x2) = min{x1,βx2}, where β is a positive num- ber, and a budget constraint: p1x1 + p2x2 = Y , where p1 and p2 are prices of good 1 and good 2 respectively, Y is the budget for the complements. Find the demand functions for good 1 and good 2.

Homework Answers

Answer #1

See images for answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
2. A consumer has the utility function U ( X1, X2 ) = X1 + X2...
2. A consumer has the utility function U ( X1, X2 ) = X1 + X2 + X1X2 and the budget constraint P1X1 + P2X2 = M , where M is income, and P1 and P2 are the prices of the two goods. . a. Find the consumer’s marginal rate of substitution (MRS) between the two goods. b. Use the condition (MRS = price ratio) and the budget constraint to find the demand functions for the two goods. c. Are...
Suppose an individual consumers two goods, with utility function U (x1; x2) = x1 + 6(x1x2)^1/2...
Suppose an individual consumers two goods, with utility function U (x1; x2) = x1 + 6(x1x2)^1/2 + 9x2. Formulate the utility maximization problem when she faces a budget line p1x1 + p2x2 = I. Find the demand functions for goods 1 and 2. (b) Now consider an individual consumers with utility function U (x1; x2) = x1^1/2 + 3x2^1/2. Formulate the utility maximization problem when she faces a budget line p1x1 + p2x2 = I. Find the demand functions for...
Consider utility function u(x1,x2) =1/4x12 +1/9x22. Suppose the prices of good 1 and good 2 are...
Consider utility function u(x1,x2) =1/4x12 +1/9x22. Suppose the prices of good 1 and good 2 are p1 andp2, and income is m. Do bundles (2, 9) and (4, radical54) lie on the same indifference curve? Evaluate the marginal rate of substitution at (x1,x2) = (8, 9). Does this utility function represent convexpreferences? Would bundle (x1,x2) satisfying (1) MU1/MU2 =p1/p2 and (2) p1x1 + p2x2 =m be an optimal choice? (hint: what does an indifference curve look like?)
equating the MRS to (-)p1/p2, maximise u(X1,X2)=X1^b. X2^(1-b) subject to p1x1+p2x2=m where 0
equating the MRS to (-)p1/p2, maximise u(X1,X2)=X1^b. X2^(1-b) subject to p1x1+p2x2=m where 0
Suppose x1 and x2 are perfect substitutes with the utility function U(x1, x2) = 2x1 +...
Suppose x1 and x2 are perfect substitutes with the utility function U(x1, x2) = 2x1 + 6x2. If p1 = 1, p2 = 2, and income m = 10, what it the optimal bundle (x1*, x2*)?
Qin has the utility function U(x1, x2) = x1 + x1x2, where x1 is her consumption...
Qin has the utility function U(x1, x2) = x1 + x1x2, where x1 is her consumption of good 1 and x2 is her consumption of good 2. The price of good 1 is p1, the price of good 2 is p2, and her income is M. Setting the marginal rate of substitution equal to the price ratio yields this equation: p1/p2 = (1+x2)/(A+x1) where A is a number. What is A? Suppose p1 = 11, p2 = 3 and M...
The utility function is given by u (x1,x2) = x1^0.5 + x2^0.5 1) Find the marginal...
The utility function is given by u (x1,x2) = x1^0.5 + x2^0.5 1) Find the marginal rate of substitution (MRSx1,x2 ) 2) Derive the demand functions x1(p1,p2,m) and x2(p1, p2,m) by using the method of Lagrange.
Suppose the utility function is given by U(x1, x2) = 14 min{2x, 3y}. Calculate the optimal...
Suppose the utility function is given by U(x1, x2) = 14 min{2x, 3y}. Calculate the optimal consumption bundle if income is m, and prices are p1, and p2.
Consider the following Constant Elasticity of Substitution utility function U(x1,x2) = x1^p+x2^p)^1/p                         &nbs
Consider the following Constant Elasticity of Substitution utility function U(x1,x2) = x1^p+x2^p)^1/p                                                                                                                                           a. Show that the above utility function corresponds to (hint:use the MRS between good 1 and good 2. The ->refers to the concept of limits.                  1. The perfect substitute utility function at p=1 2. The Cobb-Douglas utility function as p -->0 3. The Leontiff (of min(x1,x2) as p--> -infinity b. For infinity<p<1, a given level of income I and prices p1 and p2. 1. Find the marshallian...
The utility function is given by u (x1, x2) = x1^0.5+x2^0.5 1) Find the marginal rate...
The utility function is given by u (x1, x2) = x1^0.5+x2^0.5 1) Find the marginal rate of substitution (MRSx1,x2 ) 2) Derive the demand functions x1(p1, p2, m) and x2(p1,p2, m) by using the method of Lagrange.