Economics Problems Assignment
Economics Problems Assignment Click Link Below To Buy: http://hwcampus.com/shop/economics-problems-assignment/ Problem 1 Draw indifference curves representing the following individuals' preferences for Hemingway novels and issues of Sports Illustrated (SI) magazine. Please provide answers to the questions as well. a. Cy is an English teacher, soccer coach, and passionate Dallas Cowboys fan. He loves both literature and sports trivia. However, when he reads too many novels in a period he craves current sports stories, and vice versa. What happens to Cy's MRS of SI issues for Hemingway novels as he reads more SI issues? (HINT: remember that we define MRS as "x" for "y" and draw your graph accordingly.) b. Ernest only reads for the sake of learning new vocabulary. The content of what he reads does not matter to him as long as he encounters new words. He learns twice as many new words from a Hemingway novel as from an issue of SI. What happens to Ernest's MRS of SI issues for Hemingway novels as he reads more SI issues? What type of goods are these for Ernest? c. Ozlem loves American novels. And, though she is married to a college basketball coach, she derives no pleasure from reading about sports. What happens to Ozlem's MRS of SI issues for Hemingway novels as she reads more SI issues? Problem 3 Mara and Christina each have an income of $900 which they spend entirely on jeans and pairs of shoes. They exclusively buy a brand of jeans that sells for $75 a pair and shoes that sell for $50 a pair. a. On two separate graphs, draw Mara and Christina's budget constraint with jeans on the y-axis. b. What is the equation of the budget constraint? Provide nonmathematical interpretations of the y-intercept, x-intercept, and slope. c. Draw an indifference curve for Christina showing that she optimally allocates her income to 12 pairs of shoes and 4 pairs of jeans. What is the ratio of her marginal utility of shoes to her marginal utility of jeans at this point? d. Draw an indifference curve for Mara showing that she optimally allocates her income to 9 pairs of shoes and 6 pairs of jeans. What is the ratio of her marginal utility of shoes to her marginal utility of jeans at this point? e. Can you determine who is at a higher level of utility, Mara or Christina? f. Now suppose that jeans cost $50 instead of $75. i. On the same graphs, redraw the budget constraints. ii. Draw additional indifference curves showing that Christina now buys 13 pairs of shoes and 5 pairs of jeans and Mara buys 9 pairs of jeans and 9 pairs of shoes. iii. Now what is the ratio of Christina's marginal utility of shoes to her marginal utility of jeans? And for Mara? Problem 4 Vedant arrived on campus at the beginning of the academic year with $720 to spend on textbooks and CDs. The price of a textbook is uniformly $80 and the price of a CD is always $20. His parents made a deal with him - after he spent $240 of his own money on textbooks, they would split the cost of any additional textbooks with him. a. Draw Vedant's budget constraint with textbooks on the y-axis. Label the y- and x- intercepts. b. At what point does his budget constraint "kink"? What is the slope of the budget constraint to the left and right of the kink point? c. Draw an indifference map showing that with his parents' subsidy, Vedant buys 12 textbooks and 6 CDs, but that without the subsidy, he would have purchased 4 textbooks and 20 CDs. Problem 5 Defend or refute the following statements. You should provide detailed explanations rather than simply stating True or False: a. "If the income and substitution effects of a rise in the price of a good both cause consumption of the good to fall, the good is normal." b. "A peasant farmer allocates his entire budget to two goods: rice and meat. If rice is an inferior good, then meat must also be an inferior good."
