Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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3) i. The
a. Which of these consumers are optimising over their choices? Explain
b. For those who are not, how should they adjust their spending? Explain
ii. “Pasta is Miguel’s favourite meal therefore the law of diminishing marginal utility does not apply”. Do you agree with this statement?
iii. It is known that the indifference curve is convex. What does this tell you about the relationship between the goods?
iv. The income effect and the substitution effect work in the same direction for a normal good. Explain how this differs for an inferior good.
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