e360_apks_Midterm1Ans

e360_apks_Midterm1Ans - Midterm 1 Answer Key Andreas Pape...

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Midterm 1 Answer Key Andreas Pape , Kai Sun 1. , 1 2 2 100 100 1000 x xy y P y MRS xP yx === ⇒= += Solve for x and y and get: ** 10 20 , 33 == y 10 y * U BL x x * 10 1
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Midterm 1 Answer Key Andreas Pape , Kai Sun 2. MRS x,y =2 Y U BL X X and Y are perfect substitutes. When Jeff gets one more unit of X, he is always willing to give up two units of Y. If X and Y cost the same (price ratio=1), he will buy only X, as shown on the graph. 2
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Midterm 1 Answer Key Andreas Pape , Kai Sun 3. (a) $8 (b) 4 cookies (c) CS=(10+8+6+4)-3*4=16 (d) CS’=10<16 Neil won’t accept. 3
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Midterm 1 Answer Key Andreas Pape , Kai Sun 4. Sushi (s) is a luxury means: % 1 % s I > + + If income goes up by 10%, 10(1 10%) 11 s >+ = ± So is greater than 10 and 11. But we cannot tell if it’s greater or less than 12. s ± Since Sushi is a luxury, the only other (normal) good mac and cheese (m) must be necessity, which means: % 01 % m I << + + If income goes up by 10%: (1) must be greater than 20 since it’s a normal good
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e360_apks_Midterm1Ans - Midterm 1 Answer Key Andreas Pape...

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