W3211 Spring 2009
Professor Vogel
Recitation for the Week of January 26, 2009
1. Suppose Bob is currently willing to trade
4
movie tickets for
1
basketball ticket.
(a) If the above statement is true
and
he can either use the tickets himself or sell
them, then he must like basketball better than movies. True or False? Explain.
(b) If the above statement is true
and
False? Explain.
2. Bob±s utility function is
U
(
x;y
) =
xy
, the price of
x
is
$2
, the price of
y
is
$5
, and
Bob has
$50
to spend.
(a) What is Bob±s marginal rate of substitution of
x
for
y
(i.e.
dy
dx
j
U
) when utility
is maximized?
(b) Suppose that Bob is consuming a bundle with less
x
and more
y
than his utility
maximizing bundle. Would his
MRS
of
x
for
y
be greater, equal to, or less than
your answer in part
a
, or are you unable to tell?
3. Suppose that we drop the moreisbetter assumption (i.e. we allow people to want to
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 Spring '08
 Govel
 Order theory, Monotonic function, Convex function

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