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Question from Past Microeconomics Qualifying ExamEdit

Spring 2001 - Section II, Question three, George Mason University Give complete answers to three of the following four questions (about 25percent each) Write clear concise and legible answers.:


Suppose Al has the utility function  U = u(X~1, X~2) , where  X~1 and  X~2 are goods. His income is  W dollars. The prices of X~1 and X~2 are P~1 and P~2 respecitively.

  • a. Derive Al's demand for X~1. Be sure to explain your reasoning and mathematics
  • b. Determine wheather Al's demand for X~1 is downward sloping or not. Be sure to explain your reasoning and mathematics.
  • c. Determine whether X~1 is a normal good or not. Be sure to explain your reasoning and mathematics.
  • d. What is the relationship between the demand for good X~1 and the excess demand for good X~1? If lambda (L) appeared in your calculations, what is its economic interpretation?

AnswerEdit

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