Questions For Review Utc
1. A consumer has income of {«3,000. Wine costs W per glass, and cheese costs S6 per pound. Draw the consumer's budget constraint. What is the slope of this budget constraint?
2. Draw a consumer's indifference curves for wine and cheese. Describe and explain four properties of these indifference curves.
3. Pick a point on an indifference curve for wine and cheese and show the marginal rate of sub stitution. What does the marginal rate of substitution tell us?
•I. Show a consumer's budget constraint and indifference curves for wine and cheesc. Show the optimal consumption choice. If the price of wine is id per glass and the price of cheese is $6 per pound, what is the marginal rate of substitution at this optimum?
5. A person who consumes wine and cheese gets a raise, so his income increases from 33,000 to $4,000. Show what happens if both wine and cheese arc normal goods. Now show what happens if cheese is an inferior good.
6. The price of cheese rises from to S10 per pound, while the price of wine remains $3 per glass. For a consumer with a constant income of $3,000. show what happens to consumption of wine and cheese. Decompose the change into incomcanil substitution effects.
7. Can an increase in the price of cheese possibly induce a consumer to buy more cheese? Explain.
Average user rating: 5 stars out of 1 votes
Post a comment