6 Jan 2021
An Individual consumes good X1 and X2. Let W be the wealth of the individual and P1>0, P2>0 be the prices of the goods. For each of the utility functions provide a real life example of two goods X1 and X2 that satisfy them, draw the indifference curves, determine whether preferences are convex, strictly convex or neither, and compute the Walrasian demand, indirect utility function, Hicksian demand, and Expenditure function.
ABC plays football with the DEF Club in Mexico. If he does not suffer any injury by the end of the season, he will get a professional contract with GHI, which is worth 10,000 euros. If he is injured, he will get a contract as a fitness trainer in Ecuador, which is only worth 100 euros. The probability of suffering an injury is 10%. He is likely to get through the season unscathed with a 90%-probability.
A publicly-owned monopoly is preferable to a privately-owned one’. Discuss and provide diagrams (50 marks)