Question

21. Bryan consumes only goods 1, 2, and 3 (in quantities x1x2,and x3 respectively) and as preferences over (x1, X2, X3) bundles that are captured by the utility function uB(x1,X2,Xy) When prices were P,,52 p,-46 an$120, Bryan chose to purchase the bundle (10,10, 10). How much good2 l Bryan choose to purchase at prices unit unit unit $8 $12 P = _ and I = $240? (Assume Bryan makes purchases so as to 1unit' maximize his utility. [If the answer cannot be determined with only this information, enter 99.] unit unit 22. I consider goods 1 and 2 to be perfect substitutes. Which of the following statements is therefore necessarily true? a. I'll always consume positive quantities of both goods, regardless of prices b. When my income is low, I'l buy either good 1 or good 2, but as my income increases I'l1 start buying both c. Holding the price of good 2 fixed, there is a range of prices of good 1 for which I'l buy only good 1 and none of good 2, and another range of prices of good 1 for which I' buy only good 2 and none of goodI None of the above statements are true d.

Answer 1

Q21) amount of good 2 consumed = 10

since demand functions are homogeneous of degree 0 in all prices & income, then as we double both prices & income, then no change in demand will happen.

Q22) option C)

since two are perfect substitutes, then IC are straight lines,

So if slope of IC & slope of budget constraint ( which depends on prices) , are different, then always a corner solution will exist , where only one good is consumed , so a is false

B is also false, income has no role to play.