E100LectureNotes8

# E100LectureNotes8 - 2? A. Substitution effect B. Income...

This preview shows pages 1–8. Sign up to view the full content.

1/4/2008 1 Review

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
1/4/2008 2 Decomposing price changes p 1 Pick initial optimum A Draw new budget line Draw parallel budget line Pick point B Draw indif curve through A and B (This gives sub effect) Figure out where to put C X 1 X 2 B A C 1 C 2 C 3 C 4
1/4/2008 3 Question 1 p 1 Good 2 inferior Where is the optimum consumption bundle after the price change? 1. C 1 2. C 2 3. C 3 4. C 4 X 1 X 2 B A C 1 C 2 C 3 C 4

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
1/4/2008 4 Question 2 p 1 Goods 1 and 2 subs Good 2 normal Where is the optimum consumption bundle after the price change? 1. C 1 2. C 2 3. C 3 4. C 4 X 1 X 2 B A C 1 C 2 C 3 C 4
1/4/2008 5 Question 3 p 1 Good 1 inferior Good 1 not Giffen Where is the optimum consumption bundle after the price change? 1. C 1 2. C 2 3. C 3 4. C 4 X 1 X 2 B A C 1 C 2 C 3 C 4

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
1/4/2008 6 Question 4 p 1 If C 2 was optimal choice, which was larger for good

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 2? A. Substitution effect B. Income effect C. Cant tell X 1 X 2 B A C 1 C 2 C 3 C 4 1/4/2008 7 HINTS A to B is sub effect. Always to cheaper good Normal and inferior: These tell whether C is: Left or right of B, for good 1 Below or above B, for good 2 Substitutes, complements, or Giffen. These tell whether C is Left or right of A, for good 1 Below or above A, for good 2 X 1 X 2 B A C 1 C 2 C 3 C 4 1/4/2008 8 Approximate Exam Breakdown: &gt;=95 A+ &gt;=87.5 A &gt;=80 A- &gt;=72.5 B+ &gt;=65 B &gt;=60 B- &gt;=55 C+ &gt;=50 C &gt;=45 C- Max: 100 Min: 22 Mean: 64.6 Median: 64...
View Full Document

## This note was uploaded on 04/10/2008 for the course ECON 100A taught by Professor Babcock during the Spring '07 term at UCSB.

### Page1 / 8

E100LectureNotes8 - 2? A. Substitution effect B. Income...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online