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1. A buyer has Cobb-Douglas preferences such that mrs = − x2/ x1 . He starts...

1. A buyer has Cobb-Douglas preferences such that mrs = − x2/ x1 . He starts with 3 units of good 1 and $50. Use this information to answer the following questions.

(a) Find an expression for this consumer’s net demand for good 1 (i.e. how many more units he will buy given price p).

(b) Sketch this demand curve. (Make sure you label the axes and put p on the vertical axis.)

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