E100LectureNotes8

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

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 1/4/2008 1 Review
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 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
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 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
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 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
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 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
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 1/4/2008 6 Question 4 p 1 If C 2 was optimal choice, which was larger for good
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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: >=95 A+ >=87.5 A >=80 A- >=72.5 B+ >=65 B >=60 B- >=55 C+ >=50 C >=45 C- Max: 100 Min: 22 Mean: 64.6 Median: 64...
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This note was uploaded on 04/10/2008 for the course ECON 100A taught by Professor Babcock during the Spring '07 term at UCSB.

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

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