tutorial_1 - ECOS 2001 Tutorial 1 Part A: Complete...

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ECOS2001 Tutorial 1 1 ECOS 2001 Tutorial 1 Part A: Complete questions 1 and 2 before coming to the tutorial. Answers for these questions will be provided on blackboard, not in the tutorial. These questions will not be discussed (at length in the tute) Question 1: Your budget is such that if you spend your entire income, you can just afford either 4 units of good x and 6 units of good y or 12units of x and 2 units of y. (1) Draw the budget line. (2) What is the opportunity cost of one unit of good x in terms of good y? (3) What is the opportunity cost of one unit of good y in terms of good x? (4) Write the budget equation that gives you this budget line where the price of good x is 1. (5) Write another budget equation that gives you the same budget line, but where the price of x is 3. Question 2: There are two goods, 1 and 2. You have a total income of I and prices are 1 p and 2 p. Draw the budget line. (1) Suppose that the government takes away m dollars, regardless of your behavior (This is called a lump-sum tax). Draw the new budget line.
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tutorial_1 - ECOS 2001 Tutorial 1 Part A: Complete...

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