Microeconomics: Theory and Applications with Calculus, 4e

Exercises

All exercises are available on MyEconLab;${*}^{}=\text{answer}$ appears at the back of this book; $\mathbf{\text{M}}=\mathit{\text{mathematical}}$M = mathematical.

1. Deriving Demand Curves 

1. 1.1 Manufactured diamonds have become as big and virtually indistinguishable from the best natural diamonds (Hemali Chhapia Shah, “Pick Your Diamond, Get It Lab-Baked,” Times of India, April 28, 2014). Suppose consumers change from believing that manufactured diamonds, $q_1,$[&q_{1},&] were imperfect substitutes for natural diamonds, $q_2,$[&q_{2},&] to perfect substitutes, so that their utility function becomes $U(q_1,q_2)=q_1+q_2$[&U(q_{1}, q_{2})|=|q_{1}|+|q_{2}.&]. What effect would that have on the demand for manufactured diamonds? Derive the new demand curve for manufactured diamonds and draw it. ...