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tutorial 1(1)

# tutorial 1(1) - h F F2 1 xiv/26‘ K1 1 Yiii 1’ 72124...

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Unformatted text preview: h F. F2 1 xiv/26‘ K1; 1-- Yiii 1’ 72124.): iii/Ln 1 Problems for Tutorial (1) I 1": Problem 1 Q1. A world with two goods (an , 3:2) with price (p: = 1, p2 = 2), The consumers income is y = 4. _ (1) Draw the budget line for this consumer (try to be precise about the labelling); (2) How will the budget line change if income is increased to 6'? (3) How will the budget line change if m is increased to 2? (4) How will the budget line change if prices of both goods become two times larger. ie. (193 =17); =4)? Problem 2 1 and 27 and then draw indifferent curves for the 11::- 21. 121+; :M 11 111 Z (Y! ' 1. U = 2x13; 2. U = \$1563 + 5; 7L; 5 M12, 3 3. U: mixing”; 4. U = [mm + anm. >— v» Problemg M 28 \JL Molly’s utility function is Ute, y) 2 y + 43:5. She has 25 units of 27 and 12 units of g. If her consumption of x is reduced to 0, how many units of 3,! would she need in order to be exactly as well oil as before"? 1. 48 5‘ None of the above. (I Belinda loves chocolate and always thinks that more is better than less. Belinda thinks t that a few piano lessons would be worse than none at sill but if she had enough piano lessons to get good at playing the piano. she would prefer more lessons to less. Draw a graph with piano lessons on the horizontal axis and chocolate on the vertical axis. On your graph sketch two indifference curves for Belinda that. would be consistent with this story. Label the better of the two indifference curves AA and the worse one BB. ...
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