What is the price elasticity of demand, Macroeconomics

Assignment Help:

Consider the following utility function:

U = X1X2

Where X1 and X2 are quantities consumed of two goods. You are considering the actions of a consumer that maximizes utility. He or she has a fixed income m, and faces prices P1 and P2. The consumer spends all of its income on the two commodities.

A. Assuming that the consumer maximizes utility, what would be the exact condition showing the ratio of each good purchased by the consumer?

B. Please derive the demand functions for X1 and X2., providing an algebraic expression for each and a diagrammatic representation.

C. What is the price elasticity of demand for commodity 1? What is the price elasticity of demand for commodity 2?

For all of these questions, please provide an answer as well as a derivation or explanation for your result.

 

 

 


Related Discussions:- What is the price elasticity of demand

Law of demand , Why law of demand does not hold in pakistan

Why law of demand does not hold in pakistan

Expect to affect economic growth and wealth, Despite the economic progress ...

Despite the economic progress that the U.S. has observed in the past century, the standard of living remains extremely low in many countries. Why are some countries relatively weal

Heckscher-ohlin theory, Suppose Nigeria has 20 million workers and 16 milli...

Suppose Nigeria has 20 million workers and 16 million units of capital, while Botswana has 5 million workers and 3.5 million units of capital. Which of the following statements is

Calculate variable unit costs and total annual costs, How do you calculate ...

How do you calculate variable unit costs and total annual costs? Ans) Annual units sold, 1000. Raw materials yearly cost 650. Building rent yearly cost 9000. If sales volume enh

Energy supply, What happens to the extraction path if the choke price falls...

What happens to the extraction path if the choke price falls

Data and methodology - macroeconomy analysis, In order to estimate the VAR,...

In order to estimate the VAR, I have firstly to specify the data which will be analysed. As it is my aim to observe the correlations between oil prices and key macroeconomic variab

Calculate the equilibrium price, Assume a market with demand Q = 16p^(--2) ...

Assume a market with demand Q = 16p^(--2) that is supplied by a monopoly with costs C(Q) = 6 + Q2/8. 1. Calculate the equilibrium price, output and monopoly profits. 2. What

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd