Question

You have to draw indifference curves and budget constraints to express your answers.

The test will be held 15 hours later. Sally has yet to study for it. Suppose an hour of study can increase the score by 5 in the test.

(a) Draw the budget constraint of Sally. (Hint: good x is sleeping in hours, and good y is test score)

(b) The test is unexpectedly delayed for 5 hours. Do you think that Sally’s test score must be higher? Explain your answer intuitively and graphically.

(c) Although the test is delayed for 5 hours, Sally finds that some of the course materials are much more difficult than expected. For the first 10 hours, an hour of study can increase the score by 5. For the rest, an hour of study can increase the score by 3 only. Draw the new budget constraint of Sally.

(d) Suppose Sally choose to sleep for 10 hours in part c. Will Sally be worse off in part d? Explain your answer intuitively and graphically.

Answer #1

The test will be held 15 hours later. Student K has yet to study
for it. Suppose an hour of study can increase the score by 5 in the
test. (a) Draw the budget constraint of K. (Hint: good x is
sleeping in hours, and good y is test score) (b) The test is
unexpectedly delayed for 5 hours. Do you think that K’s test score
must be higher? Explain your answer intuitively and graphically.
(c) Although the test is...

You are a student in ECON 110, and your test is 24 hours from
now. You can spend this time either studying or sleeping. Suppose
you know that the impact of studying and sleeping on the test score
is ?(?, ?) = 8?0.5 + ?, where ? is the number of hours you spend
studying (“working”) and ? is the number of hours you spend
sleeping (“resting”). Assume your goal is to maximize your score on
the test. a) How...

1. Show a consumer’s budget constraint and indifference curves
for soda drinks and slices of pizza. Show the optimal consumption
choice. If the price of soda drinks is $1.50 per can and the price
of a slice of pizza is $2 per slice, what is the marginal rate of
substitution at the optimum?
2. Suppose the income elasticity of demand for food is 0.5 and
the price elasticity of demand is −0.25. Suppose also that Mia
spends $10,000 a year...

1. Show a consumer’s budget constraint and indifference curves
for soda drinks and slices of pizza. Show the optimal consumption
choice. If the price of soda drinks is $1.50 per can and the price
of a slice of pizza is $2 per slice, what is the marginal rate of
substitution at the optimum?
2. Suppose the income elasticity of demand for food is 0.5 and
the price elasticity of demand is −0.25. Suppose also that Mia
spends $10,000 a year...

1. Prove that two indifference curves cannot intersect. (Hint:
use the transi-tivity axiom)
(Part II: Budget Constraint) Put meat on horizontal and potatoes
on vertical axis.
1. (Day 1) Suppose your income is $10, the price of both meat
and potatoes is $1. Find the budget constraint equation and draw
the budget line. Specify the two intercepts and explain what they
mean.
2. (Day 2) The prices of meat and potatoes are now $0.5 and $2,
respectively. In addition, your...

Suppose you have 24
hours per day that you can allocate between leisure and
working.
(i)
Draw the budget constraint between
“leisure hours” on the horizontal axis and “wage income” on the
vertical when the wage rate is $40 per hour. Mark an optimum point
A that is meaningful. Draw a new budget constraint when the wage
rate falls to $30 per hour. Show a new optimum point B.
(ii)
On your indifference curve diagram,
decompose the effect of the...

Answer the following questions and be sure to explain
your answers.
1.) Consider a labor-leisure tradeoff problem
where 24 hours must be divided between labor and leisure. You can
assume that for simplicity and assume that labor is paid a wage .
When plotting the time constraint and indifference curves, be sure
to put leisure on the x-axis and consumption on the
y-axis.
a.) Draw the time constraint and give its
equation in slope-intercept form.
b.) Suppose now that the...

Suppose you study 3 hours per day and your test grade was 70.
For each member of the group, draw an indifference curve
representing combinations of grade and free time that would give
you equal satisfaction. Discuss reasons for why your indifference
curves might be different/the same.

Ira’s only source of income is from working. He can work
as many hours per day as he wishes (up to a maximum of 24 hours) at
a fixed wage rate of $10 / hour.
a. Initially, assume that there is no income
tax.
Draw Ira’s budget constraint.
b. Now suppose, that the government introduces a tax
rate of 50 cents in the dollar. Suppose that leisure is a normal
good that tax ends up reducing Ira’s hours worked. Show...

2. What is the relationship between marginal utilities and
prices when you are maximizing your satisfaction? (Your answer must
include a discussion of budget constraints, the choice of the
consumption bundle with the highest satisfaction, marginal
utilities and use your answers in previous question.)
(Part II: Budget Constraint) Put meat on horizontal and potatoes
on vertical axis.
1. (Day 1) Suppose your income is $1000, prices of meat and
potatoes are $10 and $20, respectively. Find the budget constraint
equation...

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