CH 9

  1. If a consumer’s net demand are (5,-3) and her endowment is (4,4),what are her gross demand?
    A: Her gross demands are (9,1)
  2. The prices are (p1,p2)=(2,3),and the consumer is currently consuming (x1,x2)=(4,4). There is a perfect market for the two goods in which they can be bought and sold costlessly.Will the consumer necessarily prefer consuming the bundle (y1,y2)=(3,5) ? Will she necessarily prefer having the bndle (y1,y2) ?
    Ans: The bundle (y1,y2)=(3,5) costs more than the bundle (4,4) at the current prices. The comsumer will not necessarily prfer consuming this bundle,but would certainly prefer to own it,since she could sell it and purchase a bundle that she would prefer. 
  3. The price are (p 1,p2) = (2,3),and the consumer is currently consuming (x 1,x2) = (4,4). Now the price change to (q1,q2) = (2,4). Could the consumer be better off under these new price?
    A: Sure. It depends on whether she was a net buyer or a net exporter of oil.
  4. The U.S currently imports about half of the petroleum that is uses. The rest of its needs are met by domestic production. Could the price of oil rise so much that the U.S would be made better off ?
    Ans:Yes,but only if the U.S switched to being a net exprter of oil.
  5. Suppose that by some miracle the number of hours I the day increased from 24 to 30 hours (with luck this would happen shortly before exam week).How would this affect the budget constraint?
    A: The new budget line would shift outward and remain parallel to the old one,since the increase in the number of hours in the day is a pure endowment effect.
  6. If leisure is an inferior good, what can you say about the slope of the labor supply curve ?
    Ans:The slope will be positive.
Last modified: Wednesday, 18 December 2013, 04:49 PM