ps1 - BUEC 280: Assignment #1 Prof. Simon Woodcock Spring...

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BUEC 280: Assignment #1 Prof. Simon Woodcock Spring 2007 Due: Tuesday, Jan 23 in lecture First, some questions that have nothing to do with labour economics, but will give you some practice applying economic concepts that you know. 1. Felix has a budget of $60. He needs your help deciding how to spend it. He lives in a small town, and there are only two goods available for purchase. The two goods are lattes (Starbucks is everywhere!) and movies. Lattes cost $5 each, and movies cost $10 each. a. Draw Felix’s budget line with lattes on the horizontal axis. What is its slope? b. You try very hard to elicit Felix’s preferences. After hours of probing questions, you find that you can construct a schedule of his marginal utilities over lattes and movies. It wasn’t pretty, but you’re quite proud nonetheless. For some allocations of lattes and movies, the table below presents the extra utility Felix derives from consuming one more latte, denoted MU(Lattes), and the extra utility he derives from consuming one
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ps1 - BUEC 280: Assignment #1 Prof. Simon Woodcock Spring...

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