1) a) Consider a consumer with preferences U = (1/3) ln x_1 + (2/3) ln x_2 and an income of m = 120. Price are p_2 = 2 and originally, p_1 = 1. Suppose the price of good 1 increases to p_1' = 4.

The income effect of this price change is Delta x_1^N = -z where z is ...

1) b) A firm uses the production function y = 4 min {(1/2)x_1, x_2}, and its input prices are w_1 and w_2 per unit. The firm's cost function is given as ....