Econ 100A Mid2A SP070 - Econ 100A Microeconomics Spring...

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Econ 100A: Microeconomics, Spring 2007, Dr. Famulari Midterm 2A: 250 Points Name_______________________________________ Student Number__________________ Question # Points Question 1: 60 points Question 2: 40 points Question 3: 70 points Question 4: 35 points Question 5: 15 points Question 6: 30 points Total points: 250
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Question 1 (60 points total) 1A. (10 points) A consumer derives utility from the consumption of X and Y. Using budget lines and indifference curves, illustrate the effect of an INCREASE in the price of X on the consumer’s utility maximizing choices of X and Y. Y | | | | | | | | | | | | |______________________________________ X 1B. (30 points) Illustrate on your graph above and explain in words what are the income and substitution effects of the increase in the price X. 1C. (20 points) What is the definition of a normal good? Is Y in your graph above a normal good? CAREFULLY explain how your graph illustrates whether or not Y is a normal good.
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Question 2 (40 points total) Toni gets utility from X and Y. Toni only likes to consume 3X with 4Y: more X without getting more Y is of no use to Toni as is more Y without getting more X. Suppose the price of X is $30 and the price of Y is $10.
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