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eco204_summer_2009_practice_problem_4

# eco204_summer_2009_practice_problem_4 - University of...

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University of Toronto, Department of Economics, ECO 204. Summer 2009. S. Ajaz Hussain ECO 204 Summer 2009 S. Ajaz Hussain Practice Problems 4 Please help improve the course by sending me an e mail 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 (ECO 204 2008 Final Exam Question) If Ajax if doesn’t have at least 5 pounds of food a day, he will die. In fact, with less than 5 pounds of food a day, he doesn’t care about anything else. Let food be on the x axis and everything else on the y axis. Answer the following questions: suppose that once he has the threshold level of food: (a) He prefers food and everything else as perfect complements. Graph Ajax’s indifference curves. (b) He prefers food and everything else as imperfect substitutes with decreasing MRS. Graph Ajax’s indifference curves. (c) He prefers food and everything else as perfect substitutes with MRS of 1. Graph Ajax’s indifference curves.

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eco204_summer_2009_practice_problem_4 - University of...

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