Question

2. (28 points) New York or Boston? 5 Josie has this utility function: $U = 10\sqrt{x} + y$ $\implies MRS = -\frac{5}{\sqrt{x}}$ a) (10 points) Show that the Marshall demand functions are $x = \left(5\frac{P_y}{P_x}\right)^2$ $y = \frac{M}{P_y} - 25\left(\frac{P_y}{P_x}\right)$ M = income b) (18 points) Josie works in New York, where $P_x = 10$ and $P_y = 8$ and $M = 1,000$ She receives a job offer from a company in Boston, where $P_x = 5$ and $P_y = 10$ What minimum income offer would make Josie indifferent between the 2 jobs?

          2. (28 points) New York or Boston?
5
Josie has this utility function: $U = 10\sqrt{x} + y$  $\implies MRS = -\frac{5}{\sqrt{x}}$
a) (10 points) Show that the Marshall demand functions are
$x = \left(5\frac{P_y}{P_x}\right)^2$
$y = \frac{M}{P_y} - 25\left(\frac{P_y}{P_x}\right)$ M = income
b) (18 points) Josie works in New York, where $P_x = 10$ and $P_y = 8$ and $M = 1,000$
She receives a job offer from a company in Boston, where $P_x = 5$ and $P_y = 10$
What minimum income offer would make Josie indifferent between the 2 jobs?

2. (28 points) New York or Boston?
5
Josie has this utility function: U = 10√(x) + y MRS = -(5)/(√(x))
a) (10 points) Show that the Marshall demand functions are
x = (5(Py)/(Px))^2
y = (M)/(Py) - 25((Py)/(Px)) M = income
b) (18 points) Josie works in New York, where Px = 10 and Py = 8 and M = 1,000
She receives a job offer from a company in Boston, where Px = 5 and Py = 10
What minimum income offer would make Josie indifferent between the 2 jobs?

Added by Lori P.

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