Advanced Mircoeconomic ECON3010

justification/explanation will not be accepted. 2 4 Answer 13 of the following 15 questions. If you answer more than 13 questions, only the fi 13 will be marked. Laura's utility function is U(g, t) = In(g) + 2 In(t), where g is the number of rounds golf and t is the number of tennis matches she plays per week. She has $M per week spend on these sports. A round of golf costs p, and a tennis match costs p,. Assume she is maximizing her utility subject to this budget. 1. Calculate the slope of Laura's indifference curve as a function of t and g. 2. What is the slope of the indifference curve that passes through the point (t=3, g=2)? What is the economic interpretation of the slope you just estimated? 3. Check whether Laura's indifference curves are convex. 4. What is the slope of Laura's budget line, assuming p, = p; / 4? What is the economic interpretation of the slope you just estimated? 5. Find Laura's ordinary demands for golf and tennis, g'(M,P., PJ and t(M,Pg,PU. 6. What kind of "good" is tennis? 7. What is the price elasticity of demand for tennis? 8. What is the maximum utility Laura can reach? 9. Find Laura's expenditure function, E(U,Pg, PJ. 10. Find Laura's compensated demand for tennis, tH(M,Pg, PJ. 11. Which demand is steeper: the ordinary demand for tennis or the compensated demand for tennis? While you can use your answer to questions 5 and 11 to answer this question, you do not have to do so! (Hint: your answer to question 6 might help a lot here...) 12. On Monday M=60 and P, = P, = 4. How much tennis would Laura play on Monday? On Tuesday her income and price of gold stay the same, but the price Tuesday? of a tennis match decreases to $3. How much tennis would Laura play on 13. What is the substitution effect on tennis caused by Tuesday's drop in the price of a tennis match ? 14. What is the income effect on tennis caused by Tuesday's drop in the price of a tennis match ? 75 7:5 4/ 60 X 4 40 30 0