What is the price elasticity of demand, Macroeconomics

Assignment Help:

Consider the following utility function:

U = X1X2

Where X1 and X2 are quantities consumed of two goods. You are considering the actions of a consumer that maximizes utility. He or she has a fixed income m, and faces prices P1 and P2. The consumer spends all of its income on the two commodities.

A. Assuming that the consumer maximizes utility, what would be the exact condition showing the ratio of each good purchased by the consumer?

B. Please derive the demand functions for X1 and X2., providing an algebraic expression for each and a diagrammatic representation.

C. What is the price elasticity of demand for commodity 1? What is the price elasticity of demand for commodity 2?

For all of these questions, please provide an answer as well as a derivation or explanation for your result.

 

 

 


Related Discussions:- What is the price elasticity of demand

Equal payment amortization schedule, Assume a 5 year equal payment amortiza...

Assume a 5 year equal payment amortization schedule with an annual interest rate of 12% and annual payments. If the beginning is 8,000 then the first interest payment will be how l

Explain why interest rates are pro-cyclical, Critically explain why interes...

Critically explain why interest rates are pro-cyclical, using the supply and demand for bonds framework.

Theory of aggregate deman, unplanned changes in inventory are counted as in...

unplanned changes in inventory are counted as inventory spending by firms.say true or false and justify

Assignment , I want you to solve problem in Macroeconomics.It is in the fil...

I want you to solve problem in Macroeconomics.It is in the file attachment.

Inflation occured over this time period, In January of 1997, the U.S. Consu...

In January of 1997, the U.S. Consumer Price Index (CPI) stood at 159.1. By January of 2008, the level had risen to 211.1. What was the average annual rate of inflation over this ti

Relation between nominal interest rate and inflation, Relation between nomi...

Relation between nominal interest rate, real interest rate and inflation If we denote the nominal interest rate by R, the real rate by r and the expected inflation by p e then

Give an example also diminishing returns to an input, Explain the productio...

Explain the production function and discuss why it is important? Explain diminishing returns to an input and give an example? Discuss why a firm's cost curve might be different in

Change in factor prices, Suppose that a firm has a budget of $30,000, that ...

Suppose that a firm has a budget of $30,000, that the wage rate is $10 per hour, and that the rental rate is about $100 per hour. I f the wage rate increases to $15 per hour and th

Decrease in the price of product, if a 10% decrease in the price of product...

if a 10% decrease in the price of product A brings about a 3% increase in the sales of product B, then a. product A and B are complementary b. the cross elasticity of demand

Tax-deductible and interest rate, Suppose that Lilistan has two types of ci...

Suppose that Lilistan has two types of citizens: low-income citizens (income = $20,000) and high-income citizens (income = $80,000). Interest income is currently taxed and each typ

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd