This topic contains a solution. Click here to go to the answer

Author Question: Sam has preferences for weekly Video Games (V) and Sodas (S) described by the utility function ... (Read 97 times)

anshika

  • Hero Member
  • *****
  • Posts: 510
Sam has preferences for weekly Video Games (V) and Sodas (S) described by the utility function U(V,S) = V2S2. Suppose the prices are denoted by pV and pS and Sam has income given by I.
 
  Assume that in Sam's optimal bundle, he consumes strictly positive quantities of both goods. a. Write out Sam's optimization problem and the associated Lagrangian expression. b. Compute the three critical value (first-order) conditions from the Lagrangian. c. Using your answer to b, find the expression for the optimal bundles as functions of the prices and income.

Question 2

A dominated strategy
 
  A) exists when one firm is weaker than another.
  B) only occurs in a mixed strategy scenario.
  C) is one that is never used by a rational actor.
  D) is a characteristic of games with multiple Nash equilibria.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

yotaSR5

  • Sr. Member
  • ****
  • Posts: 331
Answer to Question 1

a. The optimization problem is
max V2S2.
s.t. pVV + pSS = I
The corresponding Lagrangian expression is :
L = V2S2 + I-pVV - pSS
b. The first order conditions are:
L/V = 2VS2 - pV = 0
L/S = 2SV2 - pS = 0
L/ = I - pVV - pSS = 0
c. The first two expressions in b provide the MRS = MRT condition:
S/V = pV/pS
Rearrange this to S = V(pV/pS) and substitute into the third of the conditions
in (b) (AKA the budget constraint):
I - pVV - pVV = 0
Solving, we get:
V = I/(2pV).
Using the MRS = MRT condition above we get:
S = I/(2pS)

Answer to Question 2

C




anshika

  • Member
  • Posts: 510
Reply 2 on: Jul 1, 2018
Wow, this really help


Dnite

  • Member
  • Posts: 297
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

 

Did you know?

It is difficult to obtain enough calcium without consuming milk or other dairy foods.

Did you know?

Russia has the highest death rate from cardiovascular disease followed by the Ukraine, Romania, Hungary, and Poland.

Did you know?

A good example of polar molecules can be understood when trying to make a cake. If water and oil are required, they will not mix together. If you put them into a measuring cup, the oil will rise to the top while the water remains on the bottom.

Did you know?

Approximately 25% of all reported medication errors result from some kind of name confusion.

Did you know?

There are more nerve cells in one human brain than there are stars in the Milky Way.

For a complete list of videos, visit our video library