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Tutorial 1

The document contains a tutorial for ECO 301 that includes various exercises on utility functions, including determining degrees of homogeneity, concavity or convexity, and analyzing production functions. It also addresses consumer behavior with utility functions under budget constraints and provides mathematical problems related to optimal consumption. The tutorial is structured around different scenarios involving utility maximization and production analysis.

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4 views1 page

Tutorial 1

The document contains a tutorial for ECO 301 that includes various exercises on utility functions, including determining degrees of homogeneity, concavity or convexity, and analyzing production functions. It also addresses consumer behavior with utility functions under budget constraints and provides mathematical problems related to optimal consumption. The tutorial is structured around different scenarios involving utility maximization and production analysis.

Uploaded by

zapper00010
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

ECO 301 Tutorial

1) Determine the degree of homogeneity of the following utility functions


4 2 2 3
3 X +X y+x y +x+ y 1
(i) U = 2 2 (ii) U =√ y2 + x 2 (iii) U =2¿ ) (iv)U =( x 4 +3 y 4 ) 3 +2xy
2 y +x
( )
5 3 2
(v) U = X 2 + XZ 2

2)Determine if the following utility functions are concave or convex


2 2 2 2 2 2
i ¿U =2 X +Y (ii) U =X +Y (iii) U =2 X − Y − X + XY −Y

3)Imagine that the production function of Amazing Bakery is given as


2 3
Q=2 L+ L − 4 K L ,
i)Determine the value of total product and marginal product when average product
is maximum.
ii)Determine the value of output elasticity when marginal product is maximum.
Based on the results above, explain the region in which the firms operates.
4) Imagine that a consumer consumes two goods, x 1 and x 2. The utility function
representing the preference of the individual is given as
2 2
y=2 x 1 +2 x 1 +2 x2 + 4 x 2
Imagine that the individual is constrained by the income which is given as 120, and
the prices of x 1 which is N4, and x 2. which is N8. Find the optimal values of the two.

5. Imagine that U ( x , y ) =x α y β . The price of commodity X is given as P x, and the


price of price of commodity Y is given as P y , and income is given as I. Find the
following:
i) x( P x , P y , I ¿ (ii) y( P x , P y , I ¿, (iii) v( P x , P y , I ¿ (iv) x( P x , P y ,U ¿ ,( v )(y( P x , P y ,U ¿
(vi) E( P x , P y ,U ¿

6)Imagine that a consumer consumes two goods, x 1 and x 2. The utility function
representing the preference of the individual is given as
1 1
2 2
u=x + x
1 2

Imagine that the individual is constrained by the income which is given as 120, and
the prices of x 1 which is N4, and x 2. which is N8. Find the optimal values of the two.

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