Problem_Set_1

Problem_Set_1 - C. Suppose at age 29 youve spent all thus...

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Econ 100A – Microeconomics Professor Reynolds Department of Economics University of California, Berkeley Problem Set 1 Due 8:10 am Jan 27 th 1. Question 2.11 part A in the book & parts C & D & E below. For part A, the graphs do not have to be done separately as long as they are well labeled. C. Now graph the budget constraint in terms of miles only, with miles flown on the y axis and miles driven on the x axis. Write the mathematical form of the budget constraint. D. Suppose the airline changes its policy so that instead of giving you a price discount, frequent flier miles accrue yearly. Now you have $10,000 in your budget and an additional 5,000 miles that you earned last year. How do your figures in parts A.a & C change? Draw new graphs. E. Now suppose that the 5,000 frequent flier miles are transferable and your friend is willing to buy your miles at $0.15 per mile. Again indicate the changes in parts A & C. You may indicate in the graphs drawn in part D. 2. Question 3.5 part A in the book & part C below
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Unformatted text preview: C. Suppose at age 29 youve spent all thus far so you are only awaiting the 100,000 in 1 year. However, the labor party gets elected and a 25% tax is imposed on unearned income. You can get around this tax by a deal with your trust manager. She will pay you $1,000 per week to chauffer her kids to school. Any money left unearned is subject to the tax. What is the budget constraint for consumption in year 10 vs. bachelor party spending? (Assume 52 weeks in a year and include weeks of work as a variable, along with consumption in period 10 & bachelor party spending.) 3. Question 3.8 parts A & B.a (not part B.b. though you may wish to do part B.b. on your own as it will help you check that you got the right answer). For part A.d. do not give both an intuitive & a graphical answer explain your answer using the graphs only. 4. Question 4.4 part A 5. Question 4.5 parts A.a. & A.d. & B.c. Include the following 3 equations in your analysis of B.c:...
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