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Unformatted text preview: Partial credits: 2 point: for getting the slope of the saving component of the curve right (ie, showing that the budget constraint is downward sloping not necessarily that it is --0.75) 3 points: for getting the correct Y-axis = 900 3 points: for getting the correct X-axis = 1,000 (ie, showing that the budget line is kinked NOT a straight line connecting (0, 900) to (1200, 0) 2 point: for showing the endowment point (ie, where the kink is) (b) Solving for an optimum (1) Tangency condition At the optimum, the slope of the indifference curve must equal the slope of the budget line: 2 Partial credits: 6 points: for the correct set-up and execution of the problem (ie, either solving the way above, or solving using some other substitution & maximisation method) 2 point: for getting the correct c 1* 2 point: for getting the correct c 2* 2 points: for correctly determining how much the rats eat 3...
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- Spring '08