Intermediate Microeconomics
Homework Set 1: Solution to Exercise 5
Exercise 5 Denise chooses an alternative in the set X = cfw_x1 , . . . , x20 . Show that if her preferences are complete, transitive and reexive, then there exists an alternative she prefe
Revealed Preferences
1
Introduction
Alternative approach to the theory of decision making: Choices of an individual are the starting point or the primitive object of the theory. We try to see if the choice behavior of an individual displays some consiste
Intermediate Microeconomics
Homework Set 2: Solutions
Exercise 2 1. Jerry, Pat and Oral have the same preferences as Jim since their utility function are monotonic transformations of Jims. 2. Jerry, Pat, Oral, Tammy, Marjoe, and Francis have indierence cu
Name: _ Class: _ Date: _
ID: A
practice
Multiple Choice Identify the choice that best completes the statement or answers the question. _ 1. In Problem 4, Murphy used to consume 100 units of X and 50 units of Y when the price of X was $2 and the price of Y
Chapter Two
Budgetary and Other Constraints on Choice
Consumption Choice Sets
A consumption choice set is the collection of all consumption choices available to the consumer. What constrains consumption choice? Budgetary, time and other resource limitatio
Chapter Four
Utility
Utility
Central concept in economics. Idea is to measure happiness or satisfaction Traced back to utilitarianism Neo-classical interpretation
Preferences - A Reminder
x y: x is strictly preferred to y. x y: x and y are equally preferr
Chapter Four
Utility
Utility
Central concept in economics. x Idea is to measure happiness or satisfaction x Traced back to utilitarianism x Neo-classical interpretation
x
Preferences - A Reminder
x y: x is strictly preferred to y. x x y: x and y are equal
Slutskys Equation
1
Introduction
We will be concerned with how a consumers choice of a good changes in response to changes in price. Price of a good changes there are two eects: 1. The rate at which you can exchange one good for another changes, 2. the t
A Crash Course in Optimization Theory
1
Examples
Why optimize? 1. Microeconomics: The consumer wants to choose the best bundle that she can afford. 2. Finance: Portfolio management (minimize risk subject to return) 3. Diet Problem: Find the cheapest combi
Market Demand
1
From Individual to Market Demand
Add up individual choices to get total market demand. xi (p1 , p2 , mi ) = consumer is demand function for good , Market demand or aggregate demand for good
n
= 1, 2.
is
X (p1 , p2 , m1 , . . . , mn ) =
i=
Chapter Ten
Intertemporal Choice
Intertemporal Choice
Persons often receive income in lumps; e.g. monthly salary. How is a lump of income spread over the following month: Saving now for consumption later?
Present and Future Values
Begin with some simple f
Homework 3
Exercise 5
There are multiple ways to approach this problem. The easiest is to use the fact that the constraint is an equality and substitute in. So.
x2 + y 2 = 1 x2 = 1 y 2 f (x, y ) = 1 2y 2
It should be apparent that this function is maximiz
Chapter Six
Comparative Statics of Demand
Properties of Demand Functions
Comparative statics is the comparison of two different equilibrium states, before and after a change in some parameter. x How do ordinary demands x1*(p1,p2,m) and x2*(p1,p2,m) change
Chapter Five
Choice
Economic Rationality
Behavioral postulate: The decision maker chooses its most preferred alternative from those available to it. The choice set consists of the available choices.
Rational Constrained Choice: An Example
x2
x1
Rational C
Chapter Three
Preferences
Rationality in Economics
Behavioral Postulate: A decision maker always chooses its most preferred alternative from its set of available alternatives. To model choice we must then model decision makers preferences.
Preference Rela
Chapter Three
Preferences
Rationality in Economics
Behavioral Postulate: A decisionmaker always chooses its most preferred alternative from its set of available alternatives. x So to model choice we must model decisionmakers preferences.
x
Preference Rela
Chapter Two
Consumption Set and Budget Constraint
Consumption Choice Sets
A consumption set is the collection of all consumption choices available to the consumer. x What constrains consumption choice? Budgetary, time and other resource limitations.
x
Bud