115
Different Types of Tastes
5.4 Suppose two people want to see if they could benet from trading with one another in a 2-good
world.
A: In each of the following cases, determine whether trade might benet the two individuals:
(a) As soon as they start tal
1
Consumer Choice Sets and Budget
Constraints
People make the best choices they can
given their circumstances
Constraints
Income
Time
Psychological
Others
2
Consumer Choice Sets and Budget
Constraints
Consumers are small, have no power over
prices
price-
Chapter 0
Foundational Preliminaries:
Graphs and Math
1
Slope
=
That is, is a function of only
Slope =
=
Slope denotes rate of change of
with respect to
Slope is easy to find for a
straight line
2
Slope
But what about a curve? The slope on
th
Assignment 1: 178.300_1602 Advance Macroeconomics
DUE DATE: 17:00pm Friday 26 August 2016
Question 1 (Optimal choice in the consumption-saving model with credit
constraints: a numerical analysis, pages 72-73 of the Textbook)
Do all the five parts (a, b, c
What Is Microeconomics?
Microeconomics is the science that inves*gates the
social consequences of the interac*on of
ra-onal beings that pursue their perceived
self-interest.
Economics as a Science
181
Income and Substitution Effects in Consumer Goods Markest
7.1 Below we consider some logical relationships between preferences and types of goods.
A: Suppose you consider all the goods that you might potentially want to consume.
(a) Is it possible for
Consumer Surplus and Dead Weight Loss
300
10.7 Everyday Application: To Trade or Not to Trade Pizza Coupons: Exploring the Difference between
Willingness to Pay and Willingness to Accept: Suppose you and I are identical in every way same exogenous income,
Choice Sets and Budget Constraints
8
2.4 Suppose there are three goods in the world: x 1 , x 2 and x 3 .
A: On a 3-dimensional graph, illustrate your budget constraint when your economic circumstances
are dened by p 1 = 2, p 2 = 6, p 3 = 5 and I = 120. Ca
139
Doing the Best We Can
6.3 Pizza and Beer: Sometimes we can infer something about tastes from observing only two choices under two different economic circumstances.
A: Suppose we consume only beer and pizza (sold at prices p 1 and p 2 respectively) wit
73
Tastes and Indifference Curves
4.2 Consider my wifes tastes for grits and cereal.
A: Unlike me, my wife likes both grits and cereal, but for her, averages (between equally preferred
bundles) are worse than extremes.
(a) On a graph with boxes of grits o