David consumes two things: gasoline (G) and bread (B). David's utility function is U(q1, q2) = 10q10.25q20.75.
Question:
a. Derive David's demand curve for gasoline.
b. If the price of gasoline rises, how much does David reduce his consumption of gasoline, (q1/ (p1?
c. For David, how does (q1 / (p1 depend on his income? That is, how does David's change in gasoline consumption due to an increase in the price of gasoline depend on his income level? To answer these questions, find the cross-partial derivative, (2q1/((p1 (Y).
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Step by Step Answer:
a Davids Lagrangian for utility maximization is L 10 q 1 025 q 2 075 Y p q 1 q 1 p q2 q 2 The ...View the full answer
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Related Book For 
Microeconomics Theory and Applications with Calculus
ISBN: 978-0133019933
3rd edition
Authors: Jeffrey M. Perloff
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