Answered: Given the following Cobb Douglas…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Given the following Cobb Douglas Utility function u(x₁, x₂) = x₁^cx₂^d.What is Marginal Rate of Substitution MRS x₁, x₂?

The consumer faces the budget line P₁X₁ + P₂X₂= M where P₁ and P₂are price for good 1 and 2 and X₁and X₂ are quantity demanded for good 1 and good 2 respectively , M is consumer income. If the price of good 1 doubles, the price of good 2 becomes 5 times larger, and income becomes 3 times larger, write down an equation for the new budget line in terms of the original prices and income

Suppose the demand equation for good Y is given as Q = 50–5P where Q is the quantity demanded and P is the price. What price would the monopolist set if he had 50 units? How many would he sell? What price would he set if he had 100units? How many would he sell?

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