PS 2 Econ 1 F07

PS 2 Econ 1 F07 - DARTMOUTH COLLEGE ECONOMICS 1: PRICE...

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D ARTMOUTH C OLLEGE P ROFESSOR J ESSE G IUMMO E CONOMICS 1: P RICE S YSTEM H OMEWORK #2: D UE M ONDAY N OVEMBER 5 TH Instructions: The answers for Problem Set #2 do not need to be handed in. Instead you will be required to provide your answers on the Problem Set #2 Assessment that will be located on Blackboard in the Assignments folder. The assessment must be completed by midnight of Monday November 5 th . Note: You are not force to complete the assessment if you open it on Blackboard. The table below provides the indifference curves for a consumer for the good X and Y. 4 6 8 10 2 1 2 3 4 Good X Good Y A B C D E F G 9 7 5 3 1 Assume initially that P X = $8 and P Y = $2, and the consumer’s budget is $16. 1) What is the optimal consumption bundle of goods X and Y? 1, 4 px/py = 8/2 = 1/4 2) Suppose the price of good X decreases from $8 to $4. What is the optimal consumption of good X and good Y? 4/2 = 2,1 3) What is the total effect on the consumption of good X of a decrease in the price of good X from $8 to $4? 2
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PS 2 Econ 1 F07 - DARTMOUTH COLLEGE ECONOMICS 1: PRICE...

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