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Econ 100A HW 2: Consumer Theory Spring 2004 1. Maxine like both jam and jelly. However given current prices of jam and jelly and her income, Maxine buys only jam. Show that if the price of jam remains constant but (A) her income increases or (B) the price of jelly falls, she may (but will not necessarily) buy some jelly. 2. Assume that, if a family is eligible for food stamps, it pays $100 per month to obtain $150 worth of food. (A) Compare the family’s budget constraint with and without food stamps. (B) Use an indifference curve-budget line analysis to show that the family may not buy the food stamps under certain circumstances. (C) Discuss the circumstances where the family will be better off with $50 cash than this food stamp program. 3. Marginal rates of substitution and optimal bundles: (A) A consumer’s utility function is U ( B , Z ) = AB α Z β , where A , α , and β are constants, B is burritos, and Z is pizzas. What is the consumer’s marginal rate of substitution between
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This note was uploaded on 02/04/2011 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at University of California, Berkeley.
- Spring '08