Consumer preference: u = x + lnyWatch

#1
I can't seem to get this question.

I got part (a) as MRS = y

And I THINK I have a demand function for x for part (b) but am unsure where to go from there. Any help would be REALLY appreciated.

Many thanks.
0
#2
Anyone??
0
7 years ago
#3
What level is this? (first year?)
0
#4
(Original post by Deshi)
What level is this? (first year?)
Second year...Intermediate micro
0
7 years ago
#5
Aren't you missing a budget constraint? Also, what do they mean by I <= and I > ? Is I income?

income = px + y (price of y is normalised to 1 and p = price of good x in terms of y)

So the slope of the budget constraint would be -p.

Can you see what to do next?
0
#6
(Original post by Swayum)
Aren't you missing a budget constraint? Also, what do they mean by I <= and I > ? Is I income?

income = px + y (price of y is normalised to 1 and p = price of good x in terms of y)

So the slope of the budget constraint would be -p.

Can you see what to do next?

Well let me show you what I had done for the X demand function:

PxX + PyY = I

I re-arranged

X = I/Px - Py/Px . Y

and substituted the MRS = price ratio (with MRS=Y and with price ratio= Px/Py)

X = I/Px - Py/Px . Px/Py

and finally ended up with:

X = I/Px - 1

This makes sense for I > Px

And then it also makes sense to say X = 0 for I<= Px

But this leaves me stumped for what to do for the Y demand function.
0
7 years ago
#7
this is a royal holloway past paper right, i know how to do this
0
#8
(Original post by Alessandro_22)
this is a royal holloway past paper right, i know how to do this
Yeah I think the Y demand function is simply Y = Px / Py
0
X

new posts
Latest
My Feed

Oops, nobody has postedin the last few hours.

Why not re-start the conversation?

see more

See more of what you like onThe Student Room

You can personalise what you see on TSR. Tell us a little about yourself to get started.

University open days

• Cardiff Metropolitan University
Sat, 27 Apr '19
• University of East Anglia
Could you inspire the next generation? Find out more about becoming a Primary teacher with UEA… Postgraduate
Sat, 27 Apr '19
• Anglia Ruskin University
Health, Education, Medicine and Social Care; Arts, Humanities and Social Sciences; Business and Law; Science and Engineering Undergraduate
Sat, 27 Apr '19

Poll

Join the discussion

Have you registered to vote?

Yes! (551)
37.82%
No - but I will (114)
7.82%
No - I don't want to (102)
7%
No - I can't vote (<18, not in UK, etc) (690)
47.36%