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Unformatted text preview: IZ MI R U N I V E R S I T Y O F E C O N O M I C S Econ 201 - Microeconomics Name: Quiz 3 - 2008 Student No: Assist. Prof. Efe Postalcı Answer the following 6 questions the space given below. You have 45 minutes. 1. 2. 3. 4. 5. 6. 1. Cindy consumes goods x and y. Her demand for x is given by x ( p x ,m ) = 0 . 05 m- 5 . 15 p x . Now her income is $419, the price of x is $3, and the price of y is $1. If the price of x rises to $4 and if we denote the income effect on her demand for x by DI and the substitution effect on her demand for x by DS, then (a) DI = -0.28 and DS = -0.52. (b) DI = -0.28 and DS = -4.88. (c) DI = -0.52 and DS = -0.52. (d) DI = 0 and DS = -2.00. (e) None of the above. 2. The following can be said about the income and substitution effects of a price increase on the demand for a good whose price rose: (a) The former is always positive and the latter is always negative....
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This note was uploaded on 05/05/2010 for the course ECONMOICS ECON 203 taught by Professor Josephpetry during the Spring '10 term at University of Illinois, Urbana Champaign.
- Spring '10