{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Practice Problem-Consumer Theory

# Practice Problem-Consumer Theory - Econ 1101 Practice...

This preview shows pages 1–4. Sign up to view the full content.

1 Econ 1101 Practice Questions about Consumer Theory Question 1 : Sam eats only green eggs and ham. He has an income of \$36. Green eggs have a price of P G = \$2 and ham has a price of P H = \$6. Sam’s preferences are represented by the utility function Utility = 10*Q G + 40*Q H where Q G and Q H are Sam’s consumption of green eggs and ham. (a) On the graph below, draw in Sam’s budget constraint. Put ham on the horizontal axis, which is how the graph is labeled. Label the budget constraint. (b) Sam has which kind of preferences? 1. Green Eggs and Ham are Perfect Substitutes 2. Green Eggs and Ham are consumed in fixed proportions 3. Sam's indifference curves feature diminishing marginal rate of substitution (MRS) between green eggs and ham.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 0 1 2 3 4 5 6 7 8 9 1011121314 G r e e n E g g s Ham