NAME
NAME
Demand
Introduction. In the previous chapter, you found the commodity bundle
that a consumer with a given utility function would choose in a sp eci c
price-income situation. In this chapter,
6
Chapter 2
NAME
Budget Constraint
Introduction. These workouts are designed to build your skills in de-
scribing economic situations with graphs and algebra. Budget sets are a
good place to start, b
34
Chapter 4
NAME
Utility
Introduction. In the previous chapter, you learned ab out preferences
and indi erence curves. Here we study another way of describing preferences, the utility function . A ut
50
Chapter 5
CHOICE
(Ch. 5)
x 2 = 20. Therefore we know that the consumer chooses the bundle
( x 1 , x 2 ) = (120 , 20).
NAME
Choice
Introduction. You have studied budgets, and you have studied prefer
50
CHOICE
(Ch. 5)
Chapter 5
NAME
Choice
Introduction. You have studied budgets, and you have studied preferences. Now is the time to put these two ideas together and do something with them. In this ch
98
Chapter 8
SLUTSKY EQUATION
NAME
Slutsky Equation
Introduction. It is useful to think of a price change as having two dis-
tinct e ects, a substitution e ect and an income e ect. The substitution
e
34
UTILITY
(Ch. 4)
Chapter 4
NAME
Utility
Introduction. In the previous chapter, you learned about preferences
and indierence curves. Here we study another way of describing preferences, the utility f
18
PREFERENCES
(Ch. 3)
Chapter 3
NAME
Preferences
Introduction. In the previous section you learned how to use graphs to
show the set of commodity bundles that a consumer can aord. In this section, yo
Intermediate Microeconomics Econ 3101, Section 002 Homework 2-Solutions
Timothy Lim Uy
NOTE: Partial points are only to be awarded if the answers given are incorrect. Question 1. Demand I. Consider th
98
SLUTSKY EQUATION
(Ch. 8)
Chapter 8
NAME
Slutsky Equation
Introduction. It is useful to think of a price change as having two distinct eects, a substitution eect and an income eect. The substitution
Problem Set I: Budget Set
1. Eric has 1000 $ to spend on apples and telephone calls. The per unit price of an
apple is pa = 10$ and price per call is pc = 0.5$. Draw the budget set of Eric.
(a) Suppos
Problem Set II: Preferences & Utility
1. Ayla preferes the bundle (x, y ) to bundle (x , y ) if and only if x.y x .y > 1.
(a) Draw Aylas indierence curve(s) that passes from consumption bundle
(x, y )
Problem Set III: Choice & Demand
1. State, under which conditions M RS (x, y ) =
Px
Py
is a
(a) Necessary condition for optimal choice.
(b) Sucient condition for optimal choice.
2. Recall Ufuk from th
Problem Set V: Edgeworth Box
1. Consider agents A and B with the utility functions uA (x, y ) = mincfw_x, 4y and
uB (x, y ) = mincfw_x, 2y . Suppose also that agent A has an initial endowment of
(xA
18
Chapter 3
PREFERENCES
(Ch. 3)
pap er. Draw an upward-sloping curve passing through the p oint (0 , 4)
and getting steep er as one moves to the right.
NAME
Preferences
When you have completed this w