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identical incomes I. Their preferences can be described by the utility functions Ut = min {x1, x2} and Uj = x1x2, respectively. (i). Do Tom and Jerry consume an identical amount of good 1 (x1), or different amounts? Explain! (ii). Suppose both of their incomes double. By how much does consumption of good 1 (x1) change for Tom, and by how much for Jerry? (iii). Suppose good 1 (x1) becomes more expensive. In which direction does the consumption of good 2 (x2) change for Tom, and in which direction for Jerry?

identical incomes I. Their preferences can be described by the utility functions Ut = min {x1, x2} and Uj = x1x2, respectively. (i). Do Tom and Jerry consume an identical amount of good 1 (x1), or different amounts? Explain! (ii). Suppose both of their incomes double. By how much does consumption of good 1 (x1) change for Tom, and by how much for Jerry? (iii). Suppose good 1 (x1) becomes more expensive. In which direction does the consumption of good 2 (x2) change for Tom, and in which direction for Jerry?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. Tom (T) and Jerry (J) have identical incomes I. Their preferences can be described by the utility functions = min {x1, x2} and Uj Ut = x1X2, respectively. (i). Do Tom and Jerry consume an identical amount of good 1 (x1), or different amounts? Explain! (ii). Suppose both of their incomes double. By how much does consumption of good 1 (x1) change for Tom, and by how much for Jerry? (iii). Suppose good 1 (x1) becomes more expensive. In which direction does the consumption of good 2 (x2) change for Tom, and in which direction for Jerry?
Transcribed Image Text:1. Tom (T) and Jerry (J) have identical incomes I. Their preferences can be described by the utility functions = min {x1, x2} and Uj Ut = x1X2, respectively. (i). Do Tom and Jerry consume an identical amount of good 1 (x1), or different amounts? Explain! (ii). Suppose both of their incomes double. By how much does consumption of good 1 (x1) change for Tom, and by how much for Jerry? (iii). Suppose good 1 (x1) becomes more expensive. In which direction does the consumption of good 2 (x2) change for Tom, and in which direction for Jerry?
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