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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 40
The relationship between a person's income and what he or she buys can sometimes be quite complicated. But there are also some simple cases that are very easy to study. Here are two examples of the relationship between housing demand and income:
1. Suppose that a person's MRS of housing (X) for other goods (Y) depends only on the ratio X /Y. Show that the quantity of housing purchased will always be a constant fraction of income so long as the price of housing relative to other goods does not change.
2. Suppose people have a point at which they have enough housing (say X* ). Up to X* the MRS follows the pattern in case 1, but beyond X* the MRS becomes zero. What would the relationship between income and housing demand look like in this case?
1. Suppose that a person's MRS of housing (X) for other goods (Y) depends only on the ratio X /Y. Show that the quantity of housing purchased will always be a constant fraction of income so long as the price of housing relative to other goods does not change.
2. Suppose people have a point at which they have enough housing (say X* ). Up to X* the MRS follows the pattern in case 1, but beyond X* the MRS becomes zero. What would the relationship between income and housing demand look like in this case?
Explanation
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To prove that the quantity of housing pu...
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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