# econ 302 ass 4 - Christine Drews Econ 302 Toosi Section 2...

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Christine Drews Econ 302 – Toosi Section 2 4 th Problem set 5/13/2009 Questions for Review 1. Since your budget is made up of the prices of goods and your current income, you would be equally well off if the prices went up 20% when your income goes up 20% also. This is because the effect of a change in income is much like the effect of an equal proportional change in price. 2. False. Just because you know the slope, doesn’t mean you know the prices. The slope is the ratio of the two prices, which doesn’t necessarily offer the exact price, but rather the relationship between two prices. Problems 3. Cashews > Almonds Almonds > Walnuts Pecans ~ Macadamia nuts Macadamia nuts > Almonds a. Smith would prefer pecans. By way of the transitive property, since pecans are basically equal to Macadamia nuts, and Macadamia nuts are preferred to almonds, pecans would be preferred to almonds. b. It is impossible to tell which of Macadamia nuts or cashews is preferred. The only inference we can make about these two is that they are both preferred to almonds. Other than this, there is no connection between these goods.

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econ 302 ass 4 - Christine Drews Econ 302 Toosi Section 2...

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