Homework 3 Prof. Hocheol Jeon Microeconomics Please write your name and student ID (l) on your answer sheet. Problem 1. A consumer has an utility function Mm, $2) = 2D In 31 + 32. Suppose p2 = 1 is xed. 1.1. Assume p1 = 2. Draw income offer curve. 1.2. (331 is not 2 anymore, but just p1.) Assume m = 40. Draw price offer curve for good 1. 1.3. Assume p1 = 2, p2 = 1, m = 40. Compute the (Hickian) income and substitution effect for good 1 and 2 when the price of good 1 rises to 4 (Le. p1 = 1 ) p1 = 4). Problem 2. A consumer has an utility function u(a':1,x2) = a 1n 1:1 + (1 0:) ln $2. Suppose 301,302 and m are prices for good 1 and 2 and the consumer's income, respectively. 2.1. Derive the demand function for good 1 and 2. 2.2. Derive the own-price, cross-price and income elasticity of good 1. 2.3. Derive and draw the price offer curve, income offer curve and Engel curve of good 1