50

1. If the price of good 1 is doubled, the price of good 2 is multiplied by 5 and income is tripled. Show the new budget line as a function of initial prices and income by using an equation.

2. The government decides to establish a subsidy on the quantity of good 1 of s, a tax on the quantity of good 2 of t, and a flat-rate tax of u. What is the formula for the new budget line?

3. If p2 decreases, will the consumer necessarily enjoy at least the same welfare as before? Explain it with a graph.

4. The coach of a soccer team says that, given any two strikers, A and B, he always prefers the tallest and fastest. Is this relation transitive? Is complete?

5. Explain convex preferences, what is preferred combined baskets or extreme baskets?

6. What is the marginal rate of substitution of 1000 peso bills for 100 peso bills?