Suppose that a consumer with income of birr 90 wants to spend the whole income on good B and good A. Assume that the goods are consumed on a one-to-one basis and one good is worthless without the other. The price of good A and B are both 3 birr. i. How many units of good A&B will the consumer buy? ii. If the price of good A increases to birr 6, how many he/she buy of each? iii. What type of preferences does consumption of the two goods represent? What is the shape of the indifference curve for this type of preference?

/in /by

Suppose that a consumer with income of birr 90 wants to spend the whole income on good B
and good A. Assume that the goods are consumed on a one-to-one basis and one good is
worthless without the other. The price of good A and B are both 3 birr.
i. How many units of good A&B will the consumer buy?
ii. If the price of good A increases to birr 6, how many he/she buy of each?
iii. What type of preferences does consumption of the two goods represent? What is
the shape of the indifference curve for this type of preference?

You might also like
A firm’s production function is QQ = 2LL2KK3. a) Write an expression for the marginal product of labor. b) Write an expression for the marginal product of capital. c) Write an expression for the marginal rate of technical substitution of labor for capital.
Do monopoly firms get a normal profit or supernormal profit in the short run? Explain how?
If a firm faces a perfectly elastic demand curve for its products, then
Suppose that BJP imposes a tariff on imported autos to protect Indian auto industry from foreign competition. Assuming that India is a price taker in the world auto market , shown on a diagram : change in quantity of imports, loss of Indian consumers, gain to indian manufacturers, government revenue, dead weight loss associated with tariff.
If cost function is C=wL + rK. Specify quantities of capital and labour that minimise costs?
Given the demand function P = 20 – 5Q, find the price elasticity of demand when price of the commodity is 5 Birr per unit. Mention if the demand is price elastic or inelastic at this point Suppose that the total utility function of a consumer is given by TU(x,y) = 3x2 y and the prices of X and Y are 1 Birr and 2 Birr per unit, respectively. If the income of the consumer is 600 Birr and if he spends all of his income on the consumption of commodities of X and Y, find the optimum amount of X and Y that the consumer will consume at equilibrium and find MRTSx,y. Suppose the cost function is given as C = 135 + 75Q – 15Q2 + Q3. Prepare a cost schedule (table) showing the TFC, TVC, TC, AFC, AVC, MC, and ATC. Is this cost function a short run or a long run cost function? Why? Draw the cost curves on the basis of cost data obtained from the cost function . Suppose the short run market price a competitive firm faces is Birr 9 and the total cost of the firm is: TC = 200 + Q + 0.02Q 2 . Answer the questions that follow. (A) Calculate the short run equilibrium output and profit of the firm. (B) Derive the MC, ATC, and AVC and calculate the values at the short run equilibrium output. (C) Calculate the producers’ surplus at the equilibrium output. (D) Find the output level that will make the profit of the firm zero.
Economists tend to disagree because: A. they tend to be difficult. B. they might be biased. C. they use different scales on their production possibility frontiers. D. one economist might calculate total production in Rands and the other economist might calculate total production in dollars. E. All of the above is correct
“If the business operates in the economy, there will be stage of peak, slow down and losses also. That’s the part of business”. Which concept is explain in the statement?