Questions Microeconomics (with answers)

1 Page 1 (of 2) 3 Consumer choice 08/06/2016 Questions Microeconomics ( with answers ) 3 Consumer choice 01 a Budget line A consumer spends his income of 300 on good A or on good B or on any combination of A and B. One unit of A costs 3 and one unit of B 5. Draw a budget line. 01 b Budget line (01 a continued) In the case of 01 a, income rises from 300 to 360, other things remaining equal. Draw an additional new budget line to illustrate the change. 01 c Budget line (01 a continued) In the case of 01 a, the price of 1 unit of B falls from 5 to 4, other things remaining equal.

2 Draw an additional new budget line to illustrate the change. 02 Indifference curve1 Explain why indifference curves (IC) cannot cross as follows: IC1 IC2 IC1 Good B Good A IC2 03 Indifference curve 2 Can an indifference curve look like that? Indifference curve? Good B Good A Page 2 (of 2) 3 Consumer choice 08/06/2016 04 Consumer choice Explain why the consumer chooses neither b nor c, but a. IC2 IC3 IC1 Good B Good A Budget line a c 05 Complements and substitutes The price of good A rises. Are A and B complements or substitutes?

3 Good B Good A Budget line (Bl) 1 Bl 2 06 Normal and inferior goods The income of a consumer rises. Are A and B normal or inferior goods? Good B Good A Bl 2Bl 1 IC1 IC2 answers . Click here!