PSLecture12 - Problem Set for Lecture 12: Consumer...

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Problem Set for Lecture 12: Consumer Behaviour: Inferiors, Incomes and Gifts [January 5, 2010] Note: Questions marked T may be selected for tutorial presentation. T12.1 “Maloney spends all his disposable income on tacos [ x-axis good] and hamburgers [y-axis good]. Maloney takes the position that his demand curve for tacos is based upon the following assumptions: his tastes [reflected by a set of ordinally ranked convex consumer indifference curves] do not change and the price of tacos and the price of hamburgers also do not change.” **T12.2 “Mick purchases only T-bone steaks [x-axis product] and tuna fish steaks [y-axis product]. Mick has a weekly level of disposable income of $200. The current price for each product is $10 per unit. Mick argues that he could purchase each of the following combinations, taken separately, each week. In addition, Mick takes the position that each of the following combinations would allow him to maximize his level of consumer satisfaction: a. 10 T-bone steaks and 20 tuna fish steaks; b. 10 T-bone steaks and 5 tuna fish steaks; c. 4 T-bone steaks and 16 tuna fish steaks; d. 20 T-bone steaks and no tuna fish steaks.” T12.3 “Michelle looks at her consumer indifference curve diagram and notices that one of her consumer indifference curves [M 1100] is tangent to her current budget line at Point Z. Michelle does not understand the significance of this tangency. On the one hand, Michelle would like to be on indifference curve M1200. Michelle also observes that other indifference curves [notably M 800 and M 700] intersect her budget line. Michelle also believes that she might wish to purchase the quantities of the two goods identified at one of these intersection points [i.e., where either M 800 or M 700] cross her budget line.” T12.4 “Malloy only purchases pizza [x-axis product] and submarine sandwiches [y-axis product] with a given level of disposable income. In deriving the demand curve for Malloy for pizza
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PSLecture12 - Problem Set for Lecture 12: Consumer...

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