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    Economics Mastery Micro

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    naythanfeld
    The mastery of microeconomics

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    © All Rights Reserved
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    Economics Mastery Micro

    Uploaded by

    naythanfeld
    5 views5 pages
    The mastery of microeconomics

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    © © All Rights Reserved

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    PDF, TXT or read online from Scribd

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    The mastery of microeconomics

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    5 views5 pages

    Economics Mastery Micro

    Uploaded by

    naythanfeld
    The mastery of microeconomics

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 5

    ECON 410: Homework #4

    Directions
    1. Read the entire assignments: there are 10 multiple choice and several long form problems.
    2. This assignment is due in GRADESCOPE by 11:59pm (almost midnight) on Saturday, Oct.
    7, 2023.
     An answer key will be posted in Canvas under Files/Assignments & keys the next day.
     It’s your responsibility to allow enough time before submission to safeguard against technical
    glitches. The latter includes making a pdf/pics of your answer sheets. This may take time: it
    your responsibility to do it on time.

    3. Submit your answers through GRADESCOPE.


    4. Click here for Gradescope submission instructions
    (https://www.youtube.com/watch?v=j_kha2UkeMY).
     Use a Bubble Sheet for the multiple choice: Canvas/Files/Bubble Sheet Template.
     Put your name and PID clearly on the top of every answer sheet and bubble sheet.
     Upload a clear scan or image for each long form question. You will not receive any credit for
    illegible answers. I highly recommend using a free app, such as Genius Scan or Scannable, to
    convert your pictures into a pdf. Apply the black and white or color filter to
    your pictures to make your answers easier to see!
     Make sure each upload is right-side up and not rotated.

    1
    Multiple Choice Questions (5 points each)

    1. Rahul’s preferences over goods x and y are represented by 𝑈(𝑥, 𝑦) = 𝑥𝑦 + 𝑦. What is his demand
    function for good y assuming an interior solution?

    a. 𝑌

    b. 𝑌

    c. 𝑌

    d. 𝑌

    2. Tommy Jr. likes peanut butter (B) and jelly (J), but only if he gets exactly 2 tablespoons of
    peanut butter with every 1 tablespoon of jelly. Tommy Jr.’s demand function for peanut butter is:

    a. 𝐵

    b. 𝐵

    c. 𝐵

    d. 𝐵

    e. 𝐵

    3. Kunal’s preferences over goods X and Y are represented by 𝑈(X,Y) = X + 2Y1/2. If Kunal
    chooses a corner solution, what must be TRUE?

    a. Kunal chooses to buy only good X if 𝑃𝑦


    b. Kunal chooses to buy only good Y if 𝑃𝑦
    c. Kunal chooses to buy only good X if 𝑃𝑦
    d. Kunal chooses to buy only good Y if 𝑃𝑦 .

    4. Through some fancy Lagrangian techniques, you find that an individual’s demand functions are
    /
    /
    𝑋 and 𝑌 𝑃𝑥 . Assuming an interior solution (i.e. not a corner solution), which
    of the following statements is TRUE?

    a. The income consumption curve is horizontal.


    b. The price consumption curve for X (as Px changes) is downward sloping.

    2
    c. The Engel curve for good Y is downward sloping.
    d. Cross-price elasticity of demand for good X with respect to the price of Y is negative.
    e. All the statements above are false.

    5. Assume Andrey has preferences of the form 𝑈(𝑥, 𝑦) = 𝑥𝑦 + 𝑥. Which of the following
    statements concerning his behavior is TRUE?

    a. Good y is an inferior good.


    b. He will always consume a positive amount of y at his utility maximizing bundle.
    c. As the price of good x goes up, he’ll consume more y.
    d. As the price of good y goes up, he’ll consume less x.
    e. The Law of Demand doesn’t always hold for good x.
    f. All these statements are false.

    6. Assume an individual has preferences represented by the utility function 𝑈(X, Y) = 𝑋1/2𝑌1/3.
    Which of the following statements is FALSE?

    a. The price consumption curve (as the price of X changes) is horizontal.


    b. The income consumption curve slopes upward.
    c. Cross-price elasticity of demand for good x with respect to the price of y is negative.
    d. Price elasticity of demand for good y is negative.
    e. The consumer will always choose to consume a positive quantity of each good.

    7. Assume an individual has preferences of the form 𝑈(X, Y) = X + 3Y1/3. Which of the following
    statements is TRUE at an interior solution?

    a. Goods X and Y are substitutes.


    b. The income consumption curve is vertical.
    c. The price consumption curve as the price of X changes is upward sloping.
    d. Good Y’s Engel curve is downward sloping.
    e. Good X’s demand curve is vertical.

    8. Taylor’s preferences for goods x and y are given by the utility function 𝑈(𝑥, 𝑦) = ln(𝑥) + 3𝑦. Use
    elasticity of demand to predict what will happen to her consumption of good x if the price of
    good x decreases by 12%. Assume an interior solution.
    a. 0
    b. + 3%
    c. + 6%
    d. + 12%
    e. + 48%

    3
    9. Consider the truthfulness of the following statements.
    I. If the income consumption curve is horizontal, the Engel curve for good Y is necessarily vertical.
    II. If the income-consumption curve is a vertical line, the Engel curve for good y is upward
    sloping.

    a. Only statement I is true.


    b. Only statement II is true.
    c. Both statements I and II are true.
    d. Neither statement is true.

    10. Consider the truthfulness of the following statement.


    I. If the price consumption curve (as the price of good X changes) is vertical, then the price
    elasticity of demand for good x is zero.
    II. If the price consumption curve (as the price of good X changes) is horizontal, then the
    cross-price elasticity of demand for good y with respect to the price of good X is
    necessarily positive.
    a. Only statement I is true.
    b. Only statement II is true.
    c. Both statements I and II are true.
    d. Neither statement is true.

    4
    Long Form Questions
    1. (25 Points) Lauren’s utility function is 𝑈(X, Y) = X + 12Y1/3.
    a. (10 points) Derive her demand functions for goods x and y.
    b. (5 points) Will Lauren ever choose a corner solution? If so, what would have to be true of Px?
    c. (5 points) Assume an interior solution and graph Lauren’s income consumption curve.
    d. (5 points) Assume an interior solution and graph Lauren’s price consumption curve, as the
    price of good x changes.

    2. (25 Points) Ryan’s preferences are represented by u(x,y) = 3x1/3 + 3y1/3.

    a. (10 Points) Derive Ryan’s demand function for good y. Show all your work. (10 points)
    b. (5 Points) Does good y follow the law of demand? Mathematically justify using a derivative.
    c. (5 Points) Is good X normal, inferior or income neutral? Mathematically justify using a derivative.
    d. (5 Points) Are X and Y complements, substitutes, or unrelated goods? Mathematically justify
    using a derivative.

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