1. Business
  2. Economics
  3. a write down jeremys budget constraint a formula and plot...

Question: a write down jeremys budget constraint a formula and plot...

Question details

(a) Write down Jeremys budget constraint (a formula) and plot all Jeremys affordable bundles in the graph (his budget set). Find the slope of the budget line (number). Give an economic interpretation for the slope of the budget line (one sentence) (b) Jeremys utility function is given by U(zi,T2) = V(inx1 +1nT2)2 + 7. Propose a simpler utility function that represents the same preferences (give a formula). Explain why your utility represents the same preferences (one sentence) (c) Plot Jeremys indifference curve map (graph), find the MRS analytically (give a formula) and find its value at bundle (2,4) (one number). Give an economic interpretation of this number (one sentence) Mark its value in the graph. (If you were not able to solve part c, you can use the utility function V(x1,2)-In 2In r2 for this and the following parts.) (d) Find the optimal bundle (x1, x2) (two numbers). Does Jeremy consume positive amounts of both goods? (e) Find the optimal bundle given p 2, p24 and m 40 assuming U(zi,r2) -2zi +3r2. Does Jeremy consume positive amounts of both goods? Is the optimal bundle at a point of tangency?

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution