ECONOMICS
ECO 325 ASSIGNMENT 1 MAY-SEPT 2016

# ECO 325 ASSIGNMENT 1 MAY-SEPT 2016 - UMMA UNIVERSITY ECO...

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UMMA UNIVERSITY ECO 325: INTERMEDIATE MICRO-ECONOMIC THEORY ASSIGNMENT ONE INSTRUCTIONS: ATTEMPT ALL QUESTIONS QUESTION ONE a)What is a budget line? What does the slope of the budget line measure. b)Amits’s budget line relating to good X and Y has intercept of 50 and units of good X and 20 units of good Y. i)If the price of good X is 12,What is Amit’s income? ii)What is the price of good Y? iii)What is the slope of the budget line? c)A consumer spends all her income on food and clothing. At the current prices of Pf=Ksh.10 and Pc=Ksh.5,she maximizes her utility by purchasing 20 units of food and 50 units of clothing. i)What is the consumers income? ii)What is the consumers MRS of food for clothing at the equilibrium position? d) Suppose all of an individual weekly income is spent on two goods, x and y. i) Draw the individual’s budget line if his or her income is shs. 150 per week, the price of x is shs. 10 per unit and the price of y is shs. 15 per unit.

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