Jamal has utility functionU

B

(X

1

,X

2

)=(X

1

+2)(X

2

+3)

. He also has incomem

, and faces pricesP

1

andP

2

for goods 1 and 2 respectively.

What is Jamal's budget constraint?

P

1

X

1

+P

2

X

2

=m

(P

1

+P

2

)(X

1

+X

2

)=m

P

1

+P

2

=m

P

1

X

1

+P

2

X

2

+m=0

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Problem PS2.3.2

1 point possible (graded)

What is Jamal's MRS of good 1 for good 2?

(Hint: The inverse MRS and negative MRS are not listed as answers below.)

X

1

X

2

+3X

1

+2X

2

+6

dX

2

dX

1

X

2

+3

X

1

+2

X

2

X

1

Jamal's MRS cannot be calculated from the provided information

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Problem PS2.3.3

1 point possible (graded)

What is Jamal's optimal choice of goods 1 and 2 as functions of his income and prices?

(Assume an interior solution.)

X

1

=m+2P

1

3P

2

2P

1

,X

2

=m2P

1

+3P

2

2P

2

X

1

=m3P

1

+2P

2

3P

1

,X

2

=m+3P

1

2P

2

3P

2

X

1

=m3P

1

+2P

2

2P

2

,X

2

=m+3P

1

2P

2

2P

1

X

1

=m+2P

1

3P

2

3P

2

,X

2

=m2P

1

+3P

2

3P

1

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Problem PS2.3.4

1 point possible (graded)

Korra has utility functionU

A

(X

1

,X

2

)=[(X

1

+2)(X

2

+3)]

2

. She has the same income as Jamal, and faces the same prices. Find her optimal consumption bundle.

(Assume an interior solution.)

X

1

=m+2P

1

3P

2

2P

1

,X

2

=m2P

1

+3P

2

2P

2

X

1

=m3P

1

+2P

2

3P

1

,X

2

=m+3P

1

2P

2

3P

2

X

1

=m3P

1

+2P

2

2P

2

,X

2

=m+3P

1

2P

2

2P

1

X

1

=m+2P

1

3P

2

3P

2

,X

2

=m2P

1

+3P

2

3P

1

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Problem PS2.3.5

1 point possible (graded)

A third consumer, Larry has preferencesU

C

(X

1

,X

2

)=(X

1

+2)

2

(X

2

+3)

and the same income as Jamal and Korra. Find his optimal consumption bundle.

(Assume an interior solution.)

X

1

=2m+6P

2

2P

1

3P

1

,X

2

=m+2P

1

6P

2

3P

2

X

1

=2m+2P

2

6P

1

3P

1

,X

2

=m+6P

1

2P

2

3P

2

X

1

=2m6P

2

+2P

1

3P

1

,X

2

=m2P

1

+6P

2

3P

2

X

1

=2m2P

2

+6P

1

3P

1

,X

2

=m6P

1

+2P

2

3P

2

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Problem PS2.3.6

1 point possible (graded)

How does Larry's consumption differ from Korra's?

(Assume interior solutions.)

Larry consumes moreX

1

and moreX

2

at the same prices.

Larry consumes lessX

1

and moreX

2

at the same prices.

Larry consumes lessX

1

and lessX

2

at the same prices.

Larry consumes moreX

1

and lessX

2

at the same prices.

It does not differ. Larry consumes the same amount ofX

1

and the same amount ofX

2

at the same prices.

The answer cannot be determined from the provided information

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