代写 Price Theory Assignment 1 – Consumer Theory

代写 Price Theory Assignment 1 – Consumer Theory

Price Theory Assignment 1 – Consumer Theory Suppose that Sally’s preferences over baskets containing food (good x), and clothing (good y), are described by the utility function U(x,y) = √ x+y. Sally’s corresponding marginal utilities are, MU x = 1 2 √ x and MU y = 1. Use P x to represent the price of food, P y to represent the price of clothing, and I to represent Sally’s income. Question 1: Find Sally’s food demand function, and Sally’s clothing demand function. For the purposes of this question you should assume that I/P y ≥ P y /4P x . (7 Marks) Question 2: Describe the relationship between Sally’s demand for food and, (a) Sally’s income; (b) the price of food; (c) the price of clothing.

代写 Price Theory Assignment 1 – Consumer Theory Your answers should reference the demand function that you derived in question 1, and correctly apply the relevant terminology. You should continue to assume that I/P y ≥ P y /4P x . (6 Marks) Question 3: Now assume that I/P y < P y /4P x . Find Sally’s food demand function, and Sally’s clothing demand function. (4 Marks) Question 4: Suppose that the price of clothing is P y = $50 per item, and that Sally’s income is I = $425. What are the income and substitution effects if the price of food increases from P x1 = $5 per meal, to P x2 = $12.50 per meal? (8 Marks) 1

代写 Price Theory Assignment 1 – Consumer Theory