4-Discussion Questions

4-Discussion Questions - Lecture 4: Consumer Theory (II)...

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Lecture 4: Consumer Theory (II) Suggested questions and exercises (Pindyck and Rubinfeld, Ch.4). Questions: 2, 3a, 3b, 5, Exercises: 5, 7, 9 QUESTIONS 2. Suppose that an individual allocates his or her entire budget between two goods, food and clothing. Can both goods be inferior? Explain. 3. Explain whether the following statements are true or false. a. The marginal rate of substitution diminishes as an individual moves downward along the demand curve. b. The level of utility increases as an individual moves downward along the demand curve. 5. Which of the following combinations of goods are complements and which are substitutes? Could they be either in different circumstances? Discuss. a. a mathematics class and an economics class b. tennis balls and a tennis racket c. steak and lobster d. a plane trip and a train trip to the same destination e. bacon and eggs EXERCISES 5. Each week, Bill, Mary, and Jane select the quantity of two goods, x 1 and x 2 , that they will consume in order to maximize their respective utilities. They each spend their entire
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4-Discussion Questions - Lecture 4: Consumer Theory (II)...

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