380 Problem Set _ 5-consumer choice

380 Problem Set _ 5-consumer choice - Consumer Choice:...

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Unformatted text preview: Consumer Choice: Demand Functions, Budget Shares, and Indirect Utility Functions Problem Set 5 Econ. 380 R. Pope Winter 2011 Non-Calculus Problems There is a style of economics problems (questions) called, true, false, uncertain (TFU). That is, one argues which of these answers is true, false, or uncertain (use graphs where appropriate) and why? These are usually just as challenging as the math problems. 1. TFU- If the price of food rises by 10% and income by 5%, a person initially spending half of his income on food would be neither better nor worse off as a result of the price and income change (hint: one can buy the same bundle as before the rise in income and price of food)? 2. TFU-If the price elasticity of demand for good x is .50 (really -.50), a rise in the price of x will reduce both the quantity demanded of x as well as expenditures on x? (110 review). Calculus or at least More Technical Problems 4. Each day Paul, who is in the third grade, eats lunch at school. He likes only Twinkies and 4....
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