1. If a consumer purchases two goods, good 1 and good 2, with a fixed income Y, then his/her cross-price elasticity of ordinary demand for good 2 with respect to the price of good 1 must be zero if his/her own-price elasticity of demand for good 1 is -1.0.

2. Tim believes that the price of wine signals its quality; as such, the price of wine enters his direct utility function, u(x, Pw), where x is a vector of quantities for all goods (including wine) and Pw is the price of wine. In this case, Roy's Identity continues to hold.

3. An individual has an Indirect Utility function V(p1,p2, Y), where p1 is the price of good 1, p2 is the price of good 2, and Y is income. You are told that V(1,2,Y)>V(2,1,Y). If therefore follows that the consumption of good 1 exceeds the consumption of good 2 when p1=1 and p2=2. (Hint: You may want to consider drawing a graph in (x1,x2) space).

4. Say that the income elasticity of the demand for steak is greater than the income elasticity of the demand for hamburgers. This means that the derivative of the demand for steak with respect to the price of hamburgers will exceed the derivative of the demand for hamburgers with respect to the price of steak.

5 see attach

En=1 Eff = 0, where Ef, is the compensated elastic of good i with respect to the price of good j