Exam 9: Demand for Goods and Supply of Labor and Capital

Suppose your tastes can be represented by the utility function $u \left( x _ { 1 } , x _ { 2 } \right) = x _ { 1 } ^ { 1 / 2 } + x _ { 2 } ^ { 1 / 2 }$ .Your demand function for $x _ { 1 }$ is a. $\frac { I } { 2 p _ { 1 } }$ . c. $\frac { I } { p _ { 1 } + p _ { 2 } }$ . b. $\frac { p _ { 2 } I } { p _ { 1 } \left( p _ { 1 } + p _ { 2 } \right) }$ d. $\frac { I } { p _ { 1 } }$ if $p _ { 1 } < p _ { 2 }$ and 0 if $p _ { 2 } < p _ { 1 }$ .

When tastes are quasilinear in leisure,the labor supply curve is vertical.