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Wed 14 Oct, 2015 02:59 pm
1. An individual consumer buys three goods, which are identified by the number 1 to 3. He has a fixed income and buys the goods at fixed prices. The prices of these goods are:
π1=2,π2=3,π3=4
His best attainable commodity bundle under this set of prices contains 12 units of good 1, 4 units of good 2, and 6 units of good 3.
(a) Currently, his income elasticity of demand for good 1 is 1, and his income elasticity of demand for good 2 is 2. What is his income elasticity of demand for good 3?
(b) Let πππ be the elasticity of this individualβs demand for good π with respect to the price of good π. Currently, π13 is 1 and π23 is 2. What is π33?
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