1. Consider preferences defined over the nonnegative orthant by (x1, x2) >- (y1, y2) if x1 + x2 < y1 + y2. Do these preferences exhibit local nonsatiation? If these are the only two consumption goods and the consumer faces positive prices, will the consumer spend all of his income? Explain.
2. A consumer has a utility function u(x1, x2) = max{x1, x2}. What is the consumer's demand function for good 1? What is his indirect utility function? What is his expenditure function?
3. A consumer has an indirect utility function of the form
v(p1, p2, m) = m/min{p1, p2}
What is the form of the expenditure function for this consumer? What is the form of a (quasiconcave) utility function for this consumer? What is the form of the demand function for good 1?
4. Consider the indirect utility function given by
v(p1, p2, m) = m/p1+p2
(a) What are the demand functions?
(b) What is the expenditure function?
(c) What is the direct utility function?