Also attached in file…with better formatEEP 100: PROBLEM SET 3(1) (T,F,U) When looking at an indifference map, one can tell that the preferences arehomothetic if the marginal rates of substitution are constant along rays from theorigin.(2) You are the benevolent ruler of a very small kingdom consisting of of two subjects(indexed by i = 1, 2). The subjects in your kingdom consume two different goods,x1 and x2, which can be purchased at prices of p1 and p2, respectively (you yourselfconsume nothing).a) Suppose the two subjects have identical utility functionsUi(x1, x2) = ? log(x1) + (1 ? ?) log(x2),with ? > 0 for i = 1, 2; also subject 1 has income y1, while subject 2 has incomey2. Derive Marshallian demand functions for both goods. If the total income(GDP) of your kingdom (y1 + y2) is equal to $1500, what will total demand foreach good be?b) Say prices doubled last season, but the total income (GDP) of your kingdom(y1 + y2) was equal to $3000 for that season as well. If the utility functions werethe same as in part (a), what do you expect total demand was in that season?What property or pattern does the Marshallian demand function exhibit here?c) Now suppose that subject 1 has income y1 = $500 and subject two has incomey2 = $1000. Derive an expression which describes the level of utility each subjectwill have as a function of her income (i.e., what are their indirect utility functionsVi(y, p1, p2)?).d) Suppose that youve been intrigued by a mention of Benthams work in EEP100 and have taken the initiative to read his Introduction to the Principles ofMorals and Legislation (available on-line at http://www.econlib.org/library/Bentham/bnthPML1.html). This leads you to wonder whether you can improvematters in your kingdom through a system of redistributive taxation. Your readingof Bentham suggests that an optimal distribution of income would maximizethe sum of your subjects indirect utility functions, V1(y1 + ?, p1, p2) + V2(y2 ??, p1, p2), where ? is a transfer from subject 2 to subject 1 (which could be negative).Given this criterion, what is the optimal value of ??e) You hold a town-hall meeting to discuss the proposed new redistribution. At themeeting, subject two claims that your beliefs regarding her utility function areincorrect, and that in factU2(x1, x2) = 2[? log(x1) + (1 ? ?) log(x2)].Derive the Marshallian demand functions and indirect utility for subject 2 withthis correction. How does the correction affect your earlier calculation of individualdemands? Of indirect utility?Date: Due September 29, 2015.1f) With the new indirect utility function for subject 2 (subject ones is unchanged)recalculate the optimal scheme of redistributive taxation. Comment. How doyour results depend on assuming that utility is cardinal rather than ordinal?(3) Consider the plight of two equally skilled economists, Ann and Bill. Ann lives inOhio, where she pays a monthly rent of $1000 for a 1000 square foot apartment. Billlives in Oakland in an 800 square foot apartment that is otherwise identical to Annsbut which costs him $2000 per month. Assume that the only other good that Annand Bill consume is food, which costs $10 per unit in Ohio and only $5 per unit inOakland.a) Suppose that Ann and Bill both have ordinal utility functionsU(h, z) = ? log(h) + (1 ? ?) log(z),with 0 ? ? ? 1, where h is housing services (measured in square feet occupied permonth) and z is food. Derive Ann and Bills Marshallian Demands for housingand food. Give an interpretation of the parameter ?; how does it affect choicesbetween housing services and food?b) Suppose preferences are as in (a) but with ? = 0.25. What are the locallyprevailing monthly salaries for economists in Ohio and Oakland?c) Now suppose that we dont know what Ann and Bills incomes are equal to(though they each know, and also know each others), and that further we dontknow what the value of ? is, and Anns ? may be different from Bills ?. EitherAnn or Bill could choose to move to the others location and get a job as aneconomist there at the prevailing local salary, yet they choose not to. What canyou say about the value of Anns ? relative to Bills ?? (Hint: Anns indirectutility in Ohio must be greater than her indirect utility would be in Oakland;similarly, Bill must be happier in Oakland than in Ohio.)d) A pollster surveys a random sample of Ohio residents and Oakland residents, andasks each respondent, Would you say that youre (1) Very happy; (2) Prettyhappy; or (3) Not so happy? After tabulating the results, the pollster findsthat on average people in Ohio are just as happy as people in California. Notingthat the cost of living in Ohio is lower than in California, she argues that manyCalifornians should move to Ohio, where they could be just as happy but spendless money. Comment on the quality of this argument. Are you tempted to move?(4) Extra Credit: If you know how to estimate simple regressions, this ones for you! Onbcoures youll find two files, happydata.txt and codebook.txt. The former containsvariables called HAPPY, REALINC, and REGION. Download these.a) Estimate the mean values of HAPPY and REALINC by region. Discuss. (Note:you will want to ignore any values for these variables which indicate differentmissing codes; see the codebook).b) Consider a simple regression of the formVHAPPYi = ? + ? log(REALINC) + i,where the subscripts i indicate the value of the variable for the ith observation,and VHAPPYi takes the value 1 if the respondent is Very happy, and zerootherwise. Estimate the regression. How would you interpret your estimates ofthe coefficients?2c) Try estimating the previous regression again, but replace the constant term witha set of dummy variables for the different regions. Interpret your results.
EEP 100: PROBLEM SET 3 (1) (T,F,U) When looking at an indierence map, one can tell that the preferences are homothetic if the marginal rates of…
Give us your instructions.
Select the type of service you need: writing, calculations, or programming. We’ve created an intuitive order form that tells you what information to enter and where, so make sure to fill out each required field. Also, make your requirements as specific as possible. Don’t rush! Take your time and explain everything in detail how it works.
Proceed to checkout and enter your credit card details or PayPal login, how to pay. Follow the payment provider’s instructions to confirm the transaction.
Now your order is in our system! We’ll start processing it right away.
Place Your Order
Frequently asked questions
Is your service confidential?
When you place an order with our company, we ask you to provide us with such personal information as your name, phone number, and email address. We need this data to keep you updated on the important things related to your order or account.
Is there a possibility of plagiarism in my completed order?
We complete each paper from scratch and in order to make you feel safe regarding its authenticity, we check it for plagiarism before its delivery. To do that, we use our in-house software, which can find not only copy-pasted fragments but even paraphrased pieces of text. Unlike popular plagiarism detection systems that are used by most universities (e.g. Turnitin.com), we do not report to any public databases—therefore, such checking is safe.
We provide a plagiarism-free guarantee that ensures your paper is always checked for its uniqueness.
Is there a money-back guarantee? If yes, how can I receive a refund?
You can certainly get your money back in several cases. You can receive a full refund if you have paid for your order twice or if you have placed two identical orders. In case your paper was late or the quality of the paper does not correspond to your expectations, you will get compensation for these issues.
Do you keep a database of pre-written essays?
No, we do not have such a database. All papers you order from us are written from scratch. This means your paper is unique and has never been published before—neither will it be published after we deliver it to you.
When will my custom paper be done?
While placing an order with WritersHub, you can choose a period of time within which a paper should be delivered to you. The countdown until the specified deadline starts automatically from the moment we receive your payment in our system. For example, if you pay for your order at 6pm on Monday and choose a 3-day delivery option, you will receive your custom paper by 6pm on Thursday.
Remember that a writer needs a sufficient amount of time in order to conduct thorough research. Therefore, please choose the most suitable deadline when you place an order. Moreover, the later you need your paper to be delivered to you, the cheaper it will be. Thus, you will be able to save your money while your writer will have enough time to work on your order and ensure its quality.
Make sure you upload all the additional materials at the very beginning. If you fail to do that, the deadline for your order will be postponed as well.
I haven’t received my custom paper by the deadline. What should I do?
Let us know immediately about that. You can do it by writing a message on Facebook or email us. Our support manager will carefully examine your order and will assist you with it right away. The reasons for late delivery may vary from time to time. It can happen that you have entered a wrong email address or your spam filter does not allow you to receive emails from us. It is also possible that the writer is waiting for your reply and can not continue working without your assistance, or we are checking the work for plagiarism. Whatever the case may be, contact us if you have any problems with getting your order on time.