Homework2
2024?1?27? 04:58
Intermediate Microeconomics
Spring 2024
Homework 2
Demand (Chapter 6 in the book)
Problem 1. Chad's utility function is $U(x_p,x_c) = x_px_c$, where $x_p$ is protein shakes in
gallons and $x_c$ is chicken breasts in pounds. We want to find Chad's demand function for
protein shakes $x_p(p_p,p_c, m)$ and for chicken breasts $x_c(p_p,p_c,m)$, where $p_p$ - price of a gallon
of protein shape, $p_c$ - price of a pound of chicken breasts, and $m$ - Chad's income.
(a) Write Chad's budget line:
$p_px_p + p_cx_c = m$
(b) Write the slope of Chad's indifference curve at point $(x_p,x_c)$
$\MRS = -\frac{p_c}{p_p}$
(c) Chad's indifference curve is tangent to his budget constraint at point $(x_p,x_c)$ if the
following condition is satisfied:
$p_px_p + p_cx_c = m$ $\MRS = -\frac{p_c}{p_p}$
(d) Given the equation in (c) and Chad's budget constraint, what is Chad's demand
function for protein shakes $x_p(p_p,p_c,m)$?
(e) Given the equation in (c) and Chad's budget constraint, what is Chad's demand
function for chicken breasts $x_c(p_p,p_c,m)$?
f) What fraction of income does Chad spend on protein shakes?
g) What fraction of income does Chad spend on chicken breasts?
h) Is protein shake a normal good for Chad?
i) Is chicken breast an inferior good for Chad?
j) Is protein shake an ordinary good for Chad?
