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Economics 11: Microeconomic Theory 1
Professor Christian Hellwig
Practice Problems Week 3
1)
Define the utility functions and draw the indifference curves for each of the following
cases:
a)
“Every time I consume one unit of X, I want to consume 2 units of Y”
b)
“If the price of X is bigger than the price of Y, I will only consume Y. If the price of Y
is bigger than the price of X, I will only consume X”
c)
“I don’t care about the prices of X and Y,
I only want to consume Y”
2)
Suppose John views butter and margarine as perfectly substitutable in the ratio of one
to one for each other.
a)
Draw a set of indifference curves that describes John’s preferences for butter and
margarine.
b)
If Butter costs $2 per package, while margarine cost only $1, and John has a $20 budget
to spend for the month, which buttermargarine combination will he choose? Can you
show this graphically? What happens when the price of margarine increases to $3?
3)
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This note was uploaded on 04/05/2009 for the course ECON 11 taught by Professor Cunningham during the Spring '08 term at UCLA.
 Spring '08
 cunningham
 Utility

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