Economics Answers

Prince can consume 2 goods X¹ and X² at a price p¹ and p² respectively .Princes preferences are represented by the following utility function U¹(X¹,X²) =X¹ X² and has an income of M .

a) Derive Princes Marshallian demand functions for the 2 goods

b)What are the Marshallian demand curves for the 2 goods if Princes utility changes to U²(X¹ ,X²)=⅛(X¹ ,X²).

c)Derive an expression for the marginal rate of substitution (MRS) between X¹ and X² for U²(X¹ ,X²)=⅛(X¹ ,X²).

e) suppose a production function is given by f(k,l) =l²k ,the price of capital is $10 and of labour $15.What combination of labour and capital minimises the cost of producing any given output

f) The production function of a given product is given by q=50kl. If the price of capital is $120 per day and the price of labour is $30 per day

What is the minimum cost of producing 1000 units of output ?

A university is deciding between two meal plans. One plan charges a fixed fee of $600 per semester and allows students to eat as much as they want. The other plan charges a fee based on the quantity of food consumed. Under which plan will students eat the most? Explain through economic theory.

Originally, the consumer faces the budget line p1 x 1 + p2 x 2 = m. Then the price of good 1 double, the price of good 2 becomes 4 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. Show the original and new budget lines in a diagram.