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- Why does a change in income cause a parallel shift in the budget constraint?Would a research study on the effects of soft drink consumption on childrens cognitive development he a positive or normative statement?Suppose consumer consume two goods. Can both goods be inferior? Can one of the goods be inferior? Explain your reasoning clearly. 19
- 5. Illustrate the differences between microeconomics and macroeconomics?1. Read carefully chapter 16 concerning general equilibrium analysis. Answer the following questions: In a general equilibrium analysis with two substitute goods, x and y, explain what would а. happen to the price in market x and y if supply of good y increased? How would your answer differ if x and y were complements? b. Can the utility possibilities frontier ever be upward sloping? Why? c. Explain how consumers in an economy can be made better off if the marginal rate of transformation does not equal consumers' marginal rate of substitution?7) Suppose that upon solving for optimal bundles of hamburgers and french fries, we determine that when the price of hamburgers is $5 and the price of fries is $2, that we consume 2 hamburgers and 5 orders of fries. Suppose further that, upon changing the price of fries to $4, we only consume 3 orders of fries. Draw out a demand curve for fries, labeling two points. This is not a trick question, this one is supposed to be easy.
- 14. What assumption is important in using economic model to make predicitons? a) the law of demand b) the rationality assumption c) ceteris paribus/ other things being equal d)evryone being a price takerReference Microeconomics Mankiw Chapter 21 The theory of Consumer Choice Assume that Sarah is awake for 100 hours per week. a.) Use a diagram to show Sarah’s budget constraints if she earns $6 per hour, $8 per hour, and $10 per hour. Your diagram should have consumption (as measured in dollars) on the y-axis and hours of leisure per week on the x-axis. Do not count the time that Sarah sleeps as “leisure” in your analysis. Assume that Sarah allocates each of the 100 hours that she is awake each week either to labor or to leisure. b) Now draw indifference curves on your diagram such that Sarah’s labor supply curve is upward sloping when her wage is between $6 and $8 per hour, but is downward sloping when her wage is between $8 and $10 per hour. c) Use words to explain why your graph suggests that the supply curve is upward sloping when the wage is between $6 and $8 per hour and is downward sloping when the wage is between $8 and $10 per hour.You do NOT need to draw the corresponding…A) What is substitution effect? And how it effects purchase decision of consumer? in detail B)What is intertemporal choice? And how it is elaborated in economics? in detail
- Assignments for Macroeconomics Econ 2202 Assignment 1 Chapter 1 and 2 1. What is the opportunity cost of Bananas in terms of Tacos? 2. What if the price of Tacos decreased to $0.50, what happens to the quantity of Tacos consumed given a $5 Budget? Bananas Tacos $0.50 $1 Budget $5.00 Bananas Tacos 2 4 3. 4. 3 2 8 1 9 10 Study Hours Psycholo Psycholo | Economi Economi cs gy 100 cs gy 4. 65 95 80 87 88 3. 77 94 1 4. 65 96 3. What is the Opportunity Cost of studying 3 hours for Economics (Increasing the study time in Economics from 2 hours to 3 hours). woul! beQuestion3 a) Suppose a household is faced with the choice between consuming gasoline (G) and all other goods (OG). Today the household consumes 800 liter of gasoline a year.Suppose then that a gasoline price increase is perfectly compensated by a wage increase. If the family followed the utility maximization model, how would this affect their consumption of gasoline? Explain by using a figure. b) Explain by using an example why an MRS (Marginal Rate of Substitution) between two goods must equal the ratio of the price of the goods for the consumer to achieve maximum satisfaction?4) Suppose that Laura goes on vacation for a week. She leaves Baxter with her brother, Mike, and gives him $10 to buy Baxter's food (lettuce and carrots). Given that the price of a lettuce head is $1 and the price of a carrot is $0.50, sketch the budget constraint that represents Mike's combination choices for Baxter's food. Make sure to label all your axis and intersection points.
