Question

Mr. Turk's two favorite snacks are roasted hazelnuts (21) and dried Turkish apricots (12). His preferences over the hazelnuts and apricots can be represented by the utility function ( 22) = 2014. 1. Using the formulas for Cobb-Douglas utility derived in class (you can derive it again to practice) find (i) the optimal fraction of his income spent on apricots and (ii) the optimal amount in dollars) spent on apricots. 2. What's the quantity of hazelnuts he'll consume? 3. Are apricots and hazelnuts (gross) complements, (gross) substitutes, or neither for Mr. Turk?

Answer 1

9) UCX1, X2) 2x13 X24 1. Now. Xi = 3M - 39 M Income (3+4) HP 80 total spending onx = xop, = 3917, fraction of income spent = 317 x2 = 4M1th fraction spent onxa = 444 And | %) x - 3 (axilap ro) 3) as. əxy =0, 80 two Goods ase neither Goog'complements, Nor Gross subsitutes (axilop, >o). te