Micro tut 5 Class Problems

# Micro tut 5 Class Problems - Business Microeconomics...

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Business Microeconomics, Tutorial 5 MP:9 th ed-Ch 8-9 and CFO: POM, 9 th ed. CH 6: Household behavior and consumer choice Tutorial 5: HOSEHOLD BEHAVIOUR AND CONSUMER CHOICE Class Problems and Applications 1. Bulbul enjoys classical CDs and travel books and spends \$50 a month on them. The table shows the utility she gets from each good. a. Compare the two utility schedules. Can you say anything about Bulbul’s preferences? b. What do the two utility schedules tell you about Bulbul’s preferences? c. If a classical CD and a travel book cost \$10 each, how does Bulbul spend the \$50 a month? 2. The following table gives a hypothetical total utility schedule for the Cookie Monster (CM): Calculate the CM's marginal utility schedule. Draw a graph of total and marginal utility. If cookies cost the CM 5 cents each and CM had a good income, what is the maximum number of cookies he would most likely eat? 3. Kamila lives in Chicago but goes to school in Tucson, Arizona. For the last 2 years, she has made four trips home each year. During 2008, the price of a round-trip ticket from Chicago to Tucson increased from \$350 to \$600. As a result, Kamila decided not to buy a new outfit that year and decided not to drive to Phoenix with friends for an expensive rock concert. a. Explain how Kamila's demand for clothing and concert tickets can be affected by an increase in air travel prices.

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• Spring '14
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