4- An indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. Food B Clothing a) Danyal is obsessed with food and clothes. Assume you have no knowledge of the budget line, what point would Danyal prefer to be at. b) Why can't two indifference curves not intersect, explain and illustrate your answer. c) As we move from point c to f. who's marginal rate of substitution declines.

4- An indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. Food B Clothing a) Danyal is obsessed with food and clothes. Assume you have no knowledge of the budget line, what point would Danyal prefer to be at. b) Why can't two indifference curves not intersect, explain and illustrate your answer. c) As we move from point c to f. who's marginal rate of substitution declines.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please assist wth ii and iv
15. The assumption that preferences are complete requires the consumer:(a) To rank any two bundles(b) To say bundle C is preferred to bundle A if bundle B is preferred to bundle A andbundle C is preferred to bundle B(c) To rank a bundle with more units of all goods higher than a bundle with fewer unitsof all goods(d) To have a diminishing marginal rate of substitution
5) Consider indifference curves for the consumption of milk and chocolates (you may assume that both are 'goods'). The indifference curves are drawn with the number of chocolate bars on the horizontal axis and pints of milk on the vertical axis. Suppose that at every point, consumer A's indifference curve is flatter than consumer B's. What can you conclude about consumers A and B tastes and preferences?
9. Income and substitution effects Sean and Yvette Durand live in Edmonton and enjoy going out to fancy restaurants for dinner and to diners for breakfast. On the following diagram, the purple curves I1 and 12 represent two of their indifference curves for fancy dinners and diner breakfasts. They have $800 per month available to spend on eating out. The price of a diner breakfast is always $10. Each labelled point represents the tangency between a budget constraint and the corresponding indifference curve. DINER BREAKFASTS 48 40 26 BC 0 2 5 10 Z H BC FANCY DINNERS (?) The initial budget constraint (BC₁) shows the Durands' budget constraint when the price of a fancy dinner is $160. At this price, Sean and Yvette would choose to consume two fancy dinners. Suppose that the price of a fancy dinner decreases to $40, shifting their budget constraint to BC2, which represents a new relative price of four diner breakfasts per fancy dinner. (Hint: The blue line labelled H is parallel to BC2 and…
4. Depict in separate graphs indifference curves for the following utility functions i. U(x1,x2) = min(x1,x2) ii. U(x1,x2) = max(x1, x2) iii. Are the goods in both cases substitutes or complements?
10. Assume an individual's preferences are represented by the following indifference map and he has an income of S400. Which of the following is shown when the price of Good I is $20 and the price of Good 2 increases from $10 to S16? Note: Even though the price of Good 2 is increasing, the steps to determine the income and substitution effects are the same. 50 45 40 35 30 25 20 15 10 10 15 20 25 30 35 40 45 50 Good 1 Good 2 is a normal good. Good 2 is an inferior good, but not a Giffen good. Good 2 does not satisfy the Law of Demand. • Ignoring the Income Effect, the Substitution Effect will cause the individual to consume more of Good I. A. B. 21 C. 3 None of the above statements are true. D. Good 2
2. Draw a consumer's indifference curves for orange juice and chicken rice . Describe and explain four properties of these difference curves.
4. The following questions refer to the following graph of a consumer's indifference curve. a. b. Quantity of Y 40 30 20 10 0 T I A 10 C B 1 20 30 40 Quantity of X X What is the consumer's marginal rate of substitution between points A and C? At point C, approximately what is the consumer's marginal rate of substitution at point?
3. Explain the law of diminishing marginal utility with the help of examples and also explain the assumption under which this law is applicable and what the exceptions are where this law does not hold.
4. Suppose your preferences are reflected in the indifference map shown. A burger costs $100 and a slice of pizza sells for $50. You have a food budget of $500 per week. a) How many burgers and slices of pizza will you consume in a typical week? Explain your choice. Demonstrate the effect on your consumption choice if pizza falls in price. b) 18 16 14 12 10 8 6 4 2 Burgers 2 1 3 4 5
4. Tim wants to maximise his utility given his utility function of U(A, B) = A²B4. He faces the following prices and income: PA = 25; PB = 20; M = 250. However, a change in the price of good A to PA = 22 will change his optimal bundle. If he is only interested in being able to consume his original bundle of goods, how much income would he need after the price change? (a) Tim would require £54 less income (b) Tim would require £18.33 more income (c) Tim would require £10 less income (d) Tim would require £16.66 more income (e) Tim would require £16.66 less income
I. You only consume two goods and your preferences are represented by utility function 2 U(x₁, x₂) = (x1.5 + x2.5) for x₁ > 2 and x₂ > 0.