401-samplequest1q

# 401-samplequest1q - E 401 1 Sample questions 1 cfw_a b...

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E frqrplfv 401 1 Sample questions 1 1. Let X = { a, b, c, d } , B = ± { a, b } , { a, c } , { a, d } , { b, c } , { b, d } , { c, d } , { d, b, c } , { a, b, d } , { a, c, d } ² and ( B , C ( · )) be a choice structure. Suppose C ( · ) is such that d is the best choice whenever d is available and C ( { a, b } ) = { a } , C ( { b, c } ) = { b } , and C ( { c, a } ) = { c } . (a) Does C ( · ) satisfy WARP? (b) Is there a rational preference relation which rationalizes C ( · ) on B ? (c) If { a, b, c } were another budget set could C ( · ) satisfy WARP? Defend your answers to (a), (b) and (c) carefully. 2. You are given the following information about a consumer’s purchases. Goods 1 and 2 are the only goods consumed. Year 1 Year 2 Quantity Price Quantity Price Good 1 100 100 120 100 Good 2 100 100 ? 80 For what values of good 2 consumed in year 2 would you conclude: (a) that the consumer’s consumption bundle in year 1 is revealed preferred to that in year 2? (b) that the consumer’s consumption bundle in year 2 is revealed preferred to that in year 1? (c) that her/his behaviour contradicts the weak axiom? (d) that good 1 is an inferior good somewhere for this consumer (assume WARP holds)? (e) that good 2 is an inferior good somewhere for this consumer (assume WARP holds)?

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E frqrplfv 401 2 3. Consider a price-taking consumer in a two-good world. Let w denote money wealth, ( p 1 , p 2 ) prices, x j ( p 1 , p 2 , w )
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