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# HW4S_302 - Econ 302 Solution to Fourth Problem Set Spring...

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Econ 302- Solution to Fourth Problem Set Spring 2010-Ali Toossi Due: Wednesday, February 24 Answer to question 1. You will be as well off as a year ago; your budget line will remain the same. Answer to question2. False. The slope of the budget constraint tells us only the ratio of the prices of the two goods. Answer to question 4. You prefer Coke to Diet Coke, Diet Coke to Diet Pepsi, but prefer Diet Pepsi to Coke. Answer to question 6. One bundle may be within the individual's opportunity set while the other is not. Answer to problem 1. Y(\$/wk) Seeds (lbs/wk) 100 80 60 40 20 20 40 60 80 100 Answer to problem 3. a) Pecans are equally preferred to macadamias, which are preferred to almonds, which are preferred to walnuts, so by transitivity it follows that pecans are preferred to walnuts. b) Macadamias are preferred to almonds and cashews are preferred to almonds. Transitivity tells us nothing here about the preference ranking of macadamias and cashews. 1

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Answer to problem 4. True (see diagram on next page). Each price increases by 15%, so that – Px/Py is unchanged. Y M/80 slope = 120/80 = 3/2 M/92 Slope = 138/92 =3/2 M/138 M/120 X Answer to problem 5.
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HW4S_302 - Econ 302 Solution to Fourth Problem Set Spring...

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