Consumer Theory
Income Consumption Curve
For xed prices, p and q, the Income Consumption Curve (or Path) is the
collection of optimal bundles corresponding to all the different possible income levels.
Problem Set 9 Sample Solution
1. Consider a single firm with cost function c(q) = 225 +10q + q2 for q > 0 and c(0) = 0,
where q is the firms output. Aggregate demand is D(p) = 3200 51).
a. What is the
Problem Set 6 Sample Solution
1. There are three consumers. Demand for the first consumer is d1(p) = 200 p for p < 200
and zero elsewhere. Demand for the second consumer is d2(p) = 320 2p for p < 160
Problem Set 8 Sample Solution
1. A firm has two plants that it may use to produce its output. The first plant has cost
function C1(Q1) = Q12 and the second plant has cost function C2 (Q2) = Q2 + 0.5Q2
Problem Set 10
This problem set consists of practice problems for the second midterm. All problems
appeared as midterm problems within the last few years. [Problem 3 of Problem Set 7 was also a
recent
Problem Set 8 Sample Solution
1. A firm has two plants that it may use to produce its output. The first plant has cost
function C1 (Q) = Q12 and the second plant has cost function C2 (Q) = Q2 + 0.5Q22
Problem Set 6
Problems 1 3 concern firms that use two inputs, (z1,z2) to produce one output, y,
according to a production function f(z1, zz). The firms face perunit prices w1 and w2 for the
inputs.
1.
Problem Set 4 Sample Solution
1. Tosca has an endowment consisting of both leisure time and a dividend payment, has
preferences over bundles of leisure (x) and money for consumption of all other goods
Problem Set 5 Sample Solution
1a. Suppose the own price elasticity of demand for beef is 0.65 and the cross price (chicken
price) elasticity of demand for beef is 0.4. Starting from a beef price of $2
Problem Set 3 Sample Solution
1. For utility function u(x, y) = 5x + y
a. Find the Income Consumption Curve (ICC) when prices are p = 10 and q = 5.
b. Find the Price Consumption Curve (PCC) when incom
Problem Set 2 Sample Solution
The answers for Problems 1-5 below are organized by Part (a) Part (1) and some parts
use the results of previous parts.
Part (a): Find the marginal rate of substitution a
Problem Set 10B Sample Solutions
1. Consider a firm with cost function
900 if q = 0
C(q) = where q is the firms output.
2500+100q+025q2 ifq > 0
The firm acts as a competitive pricetaker.
a. Find its s
Problem Set 10B Sample Solutions
1. Consider a firm with cost function
900 if q = 0
C(q) = where q is the firms output.
2500+100q+025q2 ifq > 0
The firm acts as a competitive pricetaker.
a. Find its s
Problem Set 6 Sample Solution
Problems 1 3 concern firms that use two inputs, (z1,z2) to produce one output, y,
according to a production function f(z1, zz). The firms face perunit prices W1 and w2 fo
Problem Set 7 Sample Solution
1. Consider three firms that use labor and capital to produce their outputs. Each firm
produces a different good. Firm 1 uses L1 and K1 to produce widgets according to th
Problem Set 10 Sample Solution
This problem set consists of practice problems for the second midterm. Problems 1 ~ 5
made up the 2013 exam. Problems 6 - 8 are additional, related problems.
The second
Professor Mumford
[email protected]
Econ 562 - Fall 2015
Problem Set 8
Due by 11:59 PM Eastern on Friday, October 16
Please type your answers and combine them into a single document. You will likely
Problem Set 11 Sample Solution
1. A monopolist with cost function C(q) = 25,000 +100q + 0.25q2 for q > 0 and 0(0) 2 0,
. . 20 0 4
where q is the firms output, faces aggregate demand D(p) = 038 forp 5
Introduction to Main Tools
Models
What is a model? It is a simplied version of a real-world situation.
Specics of the model depend on the questions to be addressed. This involves the art
of including
Consumers Surplus
Consumers Surplus with Discrete Choice
First consider a discrete version of the problem, in which the rst good must be
consumed in integer amounts.
Suppose the consumer could use onl
Cost Relationships
Relationship Between Short-run Cost Curves and Product Curves
Given the xed level of 22, let 2* (y) denote the amount of input 1 needed to produce
output y (i.e.,f(Z*(y), 22) = y).
Substitution Effects
Substitution Effects
Starting om some initial budget and optimal choice, (x*, y*), how might we
measure the income change necessary after a price change in order to make the consu
Production Functions
Production
A large part of the material on production and cost is quite similar to the previous
material on consumer utility functions and optimal choice. The terminology is diffe