econ11_08_mid_prac1

econ11_08_mid_prac1 - Eco11, Fall 2008 Simon Board...

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Simon Board Economics 11: Practice Midterm October 22, 2008 Short Questions Question 1 A consumer spends his entire budget on two goods: X and Y. (i) True or false: An increase in the price of X will lead the consumer to purchase less X. (ii) True or false: An increase in the price of X will always lead a consumer to purchase more Y. Question 2 Graphically explain the effect in the budget constraint of an increase in an individual’s income without changing relative prices. Explain the impact on the quantity demanded of both goods. Question 3 Explain the monotonicity and convexity axioms and their implications for the shape of the indifference curves. Question 4 Suppose that the consumers demand for x 1 , as a function of its own price p 1 , the price of the other good p 2 and income m is given by: x * 1 ( p 1 ,p 2 ,m ) = m p 1 + 2 p 2 Suppose one unit of x 1 costs twice as much as one unit of x 2 What is the income elasticity of demand? What is the own-price elasticity of demand? What is the cross-price elasticity of demand? 1
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econ11_08_mid_prac1 - Eco11, Fall 2008 Simon Board...

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