Assume the prices of r and y are 1 and income is 10. For the following two utility functions, find the quantities of r and y consumed at the con- sumer's optimum. (Here, it may be helpful to solve by drawing out some indifference curves.) (a) U (r,y)= Min(r, 2y) (b) U(x, y) = 2x + y (c) Suppose the price of a rises to 3. What are the new optima in each case. What are the substitution effects?

Assume the prices of r and y are 1 and income is 10. For the following two utility functions, find the quantities of r and y consumed at the con- sumer's optimum. (Here, it may be helpful to solve by drawing out some indifference curves.) (a) U (r,y)= Min(r, 2y) (b) U(x, y) = 2x + y (c) Suppose the price of a rises to 3. What are the new optima in each case. What are the substitution effects?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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