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Microeconomics

Anna Blajer-Gołębiewska M. Sc.

Exercise 8.

Consumer purchases only two types of goods. His total utility function is TU = X-Y . Draw some indifference curves. Does any of indifference curves intersects either axis?.

Exercise 9.

Consumer’s income is I=£2400 per month. He purchases only two types of goods: meals in the restaurant (M) and books (B). The price for one meal is P_M = £20 and the price for a book is P_B = £15.

a)    Determine consumer’s budget linę as a function of M and B.

b)    Determine consumer’s maximum consumption of meals and consumer’s maximum consumption of books.

c)    Draw the graph of the budget linę.

CHANGE IN INCOME

d)    Consumer income rises to I=£3000 per month. Now he will be able to buy at most........meals in the restaurant and at

most...........books.

e) The rise in income by......% causes the rise in the consumption of meals by.......% and the rise in the purchase of

books by........%.

f)    Determine the new consumer’s budget linę as a function of M and B.

g)    Draw the graph of the budget linę.

CHANGE IN PRICE

h)    The price of one meal in a restaurant decreases and new price is P_B = £10. Determine the new consumer’s budget linę as a function of M and B.

i)    Determine consumer’s maximum consumption of meals.

j)    Consumer can buy at most...........books.

k)    The fali in price of meals by ....% causes the fali / rise in the consumption of meals by.......%.

Exercise 10.

Consumer purchases only two goods. The price of good X has changed.

	July	August
Price of X	2	6
Price of Y	2	2
Income	180
Consumption of X
Consumption of Y	40	30

a)    Fili up the table with correct figures.

b) Determine consumer’s maximum consumption of X and Y in July.

c) Determine consumer’s maximum consumption of X and Y in August.

d)    Draw budget lines for July and August.

e)    Draw indifference curves for July and August.

f)    Discuss the change in the eąuilibrium point

according to the changes in price?

g)    Calculate the cross elasticity of demand for X and Y.

h)    Calculate the price elasticity of demand for X.

i)    Draw consumer’s individual demand curve for good X.

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