ECOS 2901: Solutions to Assignment 2
(1) Let u(x) = mincfw_x1 , x2 . At m = 10 and p1 = p2 = 2, what choice will
maximize the utility of the consumer?
An utility maximizing consumer must choose x1 = x2 . The reasoning
is simple. If x1 6= x2 say x1 = 3 and

Faculty of Arts and Social Sciences
School of Economics
ECOS2901: Intermediate Microeconomics Honours
Semester 1, 2014
Unit of Study Outline
Lecturer:
Dr. Stephen Cheung
Room 444, Merewether Building H04
Email address:
[email protected] (includ

ECOS2901 Intermediate Microeconomics Honours
Tutorial Work for Week 3
1. A consumer faces the budget line p1 x1 + p2 x2 = m. Write down the equation for the
budget line for each of the following situations:
(a) The price of the rst good doubles and the pr

ECOS2901 Intermediate Microeconomics Honours
Sketch Tutorial Answers for Week 2
1. By the denitions of strict preference and indierence:
zx
yx
zy
zx
yx
zy
and
not
and
and
Suppose that all three relations hold. By transitivity,
But we also have not
x z,
xz

ECOS2901 Intermediate Microeconomics Honours
Tutorial Work for Week 5
1. Consider an individual who maximises discounted utility. In a world with two periods, if
she consumes c0 in period 0 and c1 in period 1, her intertemporal utility is given by:
U (c0

ECOS2901 Intermediate Microeconomics Honours
Tutorial Work for Week 6
1. Workbook, Problems 18.9, 18.10.
2. Consider a rm that produces a single output y from two inputs x1 and x2 , by means of
1
the production function y = f (x1 , x2 ) = [xa1 + xa2 ] a .

ECOS2901 Intermediate Microeconomics Honours
Tutorial Work for Week 4
1. Guy reveals the following piece of information regarding his preferences for risky prospects
with payos of $20, $12, and $0: He is indierent between the prospects
and
($20, $12, $0;

ECOS2901 Intermediate Microeconomics Honours
Tutorial Work for Week 2
1. On slide 12 of Lecture 1 it is stated that: The assumption of transitivity implies that
indierence sets cannot intersect, for example
y x
and
z y
but
z x.
Use the
denitions of strict

ECOS2901 Intermediate Microeconomics Honours
Tutorial Work for Week 7
1. The production function for a rm is given by:
y=2 x
where y denotes output and x denotes hours of labour input. The rm is a price taker
both for its output (which sells for price p)

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Tutorial Work for Week 3
1. Banerjee, Chapter 4, Exercise 4.1, parts (a), (b), and (c).
2. A consumer has an income of 100 dollars which he plans to spend on two commodities.
The price of the first c

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Tutorial Work for Week 2
1. On slide 11 of Lecture 1 it is stated that: The assumption of transitivity implies that
indifference sets do not intersect, for example y x and z y but z x. Use the
defini

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Tutorial Work for Week 7
1. Banerjee, Chapter 8, Exercise 8.4, part (c).
2. The production function for a firm is given by:
q=2 x
where q denotes output and x denotes hours of labour input. The firm

Lecture 6. Prot Maximisation and Supply
ECOS2901 Intermediate Microeconomics Honours
Semester One 2014
Stephen L. Cheung
The University of Sydney
Stephen L. Cheung
Lecture 6. Prot Maximisation and Supply
Prot maximisation
In order to maximise prot, a rm m

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Sketch Tutorial Answers for Week 3
1.
(a) The consumer derives utility only from good 1, and her indifference curves are vertical, with preference increasing to the East. It will always be utility-ma

ECONMI _- Intamediate Microeconomics Honours
First Niki-Semester Exam - 2004
Am all Question - 60 minutes - ) marks
.1. (lOlIfark) A mnsumer consumes two goods. 1 and 2. [Let this consumers
utility function be
(11.52) uni-+123. 1:- 2 20. (1
The prices of

ECOS 2901: Solutions to Assignment 3
True or False: Explain your answers
(a) For a utility maximizing consumer, a decrease in the interest rate must
imply a decrease in savings.
False. Suppose the consumers utility function is mincfw_c1 , c2 . Assume
now

Solutions to Assignment 1
(1) Suppose that x
y and preferences are transitive. Show that I(x)
and I(y) (the indierence sets for x and y respectively) can not have
a point in common, i.e, these sets must be disjoint.
Let z 2 I(x), then z is indierent to x.

Review Questions (Exam 1)
ECOS 2901: Intermediate
Microeconomics
Section A - True/False Questions
(i) The utility function of agent A is UA = x1 + x2 while the utility of
agent B is UB = 2(x1 + x2 ) + 40. At the price vector (2, 2) agent A
consumed the bu

Lecture 3. Choice under Risk
ECOS2901 Intermediate Microeconomics Honours
Semester One 2014
Stephen L. Cheung
The University of Sydney
Stephen L. Cheung
Lecture 3. Choice under Risk
States of nature
In this Lecture, we study choices in which outcomes are

Lecture 7. General Equilibrium and Welfare
ECOS2901 Intermediate Microeconomics Honours
Semester One 2014
Stephen L. Cheung
The University of Sydney
Stephen L. Cheung
Lecture 7. General Equilibrium and Welfare
Introduction
In this lecture we will study
ge

361
NAME
29.2 (0) Consider a small exchange economy with two consumers, Astrid
and Birger, and two commodities, herring and cheese. Astrids initial
endowment is 4 units of herring and 1 unit of cheese. Birgers initial endowment has no herring and 7 units

Lecture 2. Consumer Theory:
Choice and Demand
ECOS2901 Intermediate Microeconomics Honours
Semester One 2014
Stephen L. Cheung
The University of Sydney
Stephen L. Cheung
Lecture 2. Consumer Theory: Choice and Demand
Overview
Our model of consumer choice h

Lecture 1. Consumer Theory:
Preferences and Utility
ECOS2901 Intermediate Microeconomics Honours
Semester One 2014
Stephen L. Cheung
The University of Sydney
Stephen L. Cheung
Lecture 1. Consumer Theory: Preferences and Utility
Overview
Our model of consu

Lecture 4. Choice over Time
ECOS2901 Intermediate Microeconomics Honours
Semester One 2014
Stephen L. Cheung
The University of Sydney
Stephen L. Cheung
Lecture 4. Choice over Time
Preliminaries
We now study the choice of an optimal stream of consumption o

Lecture 5. Technology and Cost
ECOS2901 Intermediate Microeconomics Honours
Semester One 2014
Stephen L. Cheung
The University of Sydney
Stephen L. Cheung
Lecture 5. Technology and Cost
Technology and production function
We switch gears, and turn to the p

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Tutorial Work for Week 13
1. For each of the games below, suppose that the game is played exactly two times. Can you
propose a subgame-perfect strategy combination that will sustain the outcome ( B,

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Sketch Tutorial Answers for Week 9
6.5 See tutorial solutions for week 8.
2.
(a) The efficient production condition states that the technical rates of substitution should
be equal in the production o

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Sketch Tutorial Answers for Week 7
8.4
(c) This question refers to Section 8.5 in Banerjee on recovering the production technology from the cost function. Shephards Lemma says that the conditional in

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Sketch Tutorial Answers for Week 6
7.1
(c) The two arguments of the minimum are equal to one another when x1 = x22 , or
x2 = x1 . The isoquants are thus L-shaped, with their corners located where x2

ECOS2901
Intermediate Microeconomics Honours
Dr. Cheung
Sketch Tutorial Answers for Week 2
1. By the definitions of strict preference and indifference:
zx
yx
zy
z x and not x z
y x and
xy
z y and
yz
Suppose that all three relations hold. By transitivity,