ECON 601 Midterm: ECON 601 Iowa State Econ601Midterm2Fall12 (2)
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Harvey lapan: answer all parts. (a) consider a consumer whose utility depends on three goods, . Her hicksian demand for goods 1and 2 are given by: h x u. 2 where u is utility, and prices are p p p x x x . 3 ip is the price of good i. 72 and the person"s utility-maximizing consumption bundle is: Suppose the discount store (from part (i)) requires individuals to purchase at least 12 units (at p ). Now how much will the person pay for the right to shop at the store? (7 points) What is the (5 points) (b) consider an individual with the hicksian demands given in part (a), who currently faces prices. If the and chooses the utility maximizing bundle . 9,1,1 p p p person"s income is unchanged, but prices change to . , will the person be p p p.
