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The exam will include one or two multi-part written-answer questions (similar to your practice problems) which you will answer on your own paper and submit your work as a file upload (you can scan your answers or take a photo of it – the important thing is it must be clearly legible and easy for me to read). The exam will also contain 10-15 multiple choice /”fill in”/matching type questions. the coverage of the exam will be everything in the course up to Roy’s Identity This means the lecture videos in Week 6 and later, covering CV, EV, etc. will not be covered. ?see files?

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5.

If U ( x, y ) ? min( x, y ) , utility maximization requires x ? y . Substitution into the

budget constraint yields x ? I ( p x ? p y ) ? y . Hence,

V ( px , p y .I ) ?

I

,

px ? p y

E ( px , p y , V ) ? ( px ? p y )V .

If U ( x, y ) ? x ? y , utility maximization requires the purchase of whichever of

these two perfect substitutes has the lower price. So, if

p x ? p y , x ? 0, y ? I p y . If p x ? p y , x ? I p x , y ? 0. Given these results,

V ( p x , p y .I ) ?

I

,

min( px , p y )

E ( px , p y , V ) ? min( px , p y )V .

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Tags:

budget constraint

utility function

indirect utility

function theorem

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