eco204_summer_2009_practice_problem_2

eco204_summer_2009_practice_problem_2 - University of...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: University of Toronto, Department of Economics, ECO 204. Summer 2009. S. Ajaz Hussain ECO 204 Summer 2009 S. Ajaz Hussain Practice Problems 2 Please help improve the course by sending me an email about typos or suggestions for improvements Note: Please don't memorize these solutions in the expectation that similar questions will appear on tests and exams. Instead, try to understand how to derive the answer as you'll be tested on techniques and applications, not on memorization. Moreover, tests and exams will cover topics and techniques that may not be in these practice problems. You are urged to go over all lectures, class notes and HWs thoroughly. Question 1 Recall that a consumer's consumption set shows the (physically) feasible combinations of goods available to the consumer. Suppose a consumer can only consume combinations in which Q2 Q1 that is, the amounts of good 2 must be less than or equal to the amounts of good 1. Graph the consumption set. Question 2 In a marketing survey, a consumer is asked about her preferences over goods A, B and C. Recall that the symbol f denotes "strictly prefers" and that the symbol ~ denotes "indifferent to". Suppose this consumer says A f B f C f A. (a) Are her preferences complete? (b) Are her preferences transitive? Question 3 Suppose 3 individuals, Britney, Jonas and Rihana are asked about their preferences over goods B, E and G. Their responses, in order of preference are in the table below: 1 University of Toronto, Department of Economics, ECO 204. Summer 2009. S. Ajaz Hussain Britney, Jonas and Rihana's Preferences over goods B, E and G Order Britney Jonas Rihana 1 2 3 B E G E G B G B E That is, Britney's preferences are B f E f G, Jonas's preferences are E f G f B and Rihana's preferences are G f B f E. (a) Suppose Britney, Jonas and Rihana are on a committee and are asked to choose between goods B vs. E on the basis of a majority voting rule. What will be the committee's decision? (b) Suppose the three individuals are on a committee and are asked to choose between goods E vs. G on the basis of a majority voting rule. What will be the committee's decision? (c) Suppose the three individuals are on a committee and are asked to choose between goods B vs. G on the basis of a majority voting rule. What will be the committee's decision? (d) Now suppose the committee itself is interpreted as a single individual. Based on the answers in (a) through (c), are the committee's preferences complete? Transitive? Question 4 (Based on 20072008 Final Exam) In a marketing survey, customers were asked about their preferences over cigarettes and coffee. The results indicate that customers perceive cigarettes and coffee to be pleasurable (`good' goods) and have increasing marginal rate of substitution. Graph these customer's indifference curves. 2 ...
View Full Document

This note was uploaded on 05/02/2011 for the course ECO 204 taught by Professor Hussein during the Fall '08 term at University of Toronto.

Ask a homework question - tutors are online