PRATICE QUESTIONS

(,)=2+3

=+

=$1,000

=$5

=$10

Recall the consumer wants to maximize(,)subject to=+.

1. Given these prices and income, calculate this consumer's optimal consumption for good x.

1. Given these prices and income, calculate this consumer's optimal consumption for good y.

1. Now suppose=$10, calculate this consumer's optimal consumption of good x.

1. Given=$10;=$10, calculate this consumer's optimal consumption for good y.

1. Given this consumer's utility function, are good x and good y complements or substitutes?

1. Now suppose we know=$10;=$1,000. At what price must good y be for the consumer to be indifferent between buying good x or good y?

(,)=[,2]

=+

=$1,000

=$5

=$10

1. Complete the sentence by filling in the blank with the appropriate bundle. The composite goodrepresented by these preferences has _____ units of goodand _____ units of good.

Choices:(1,2), (2,1), (1,1), (2,2)

1. What is the price of the composite good?

Choices:$40, $20, $5, $15

1. Given the prices and income, what is the consumer's optimal consumption of good?
2. Given the prices and income, what is the optimal consumption of good?
3. Now suppose the price of goodrises to $15. What is the optimal consumption of good?
4. Now suppose the price of goodrises to $15.What is the optimal consumption of good?
5. Are goodsandcomplements or substitutes?

(,)=^1/2y^1/2

=

=+

=$1,000

=$5

=$10

1. How much of her income will the consumer spend on good?

Choices: none, some, half, all

1. How much of her income will the consumer spend on good?

Choices: none, some, half, all

1. What is the optimal consumption of good?
2. What is the optimal consumtion of good?
3. Now suppose:

(,)=x^1/4y^3/4

=/3

How much of her income will the consumer spend on good?

Choices: , , none, all,

1. Given the new utility function, how much of her income will the consumer spend on good?

Choices: , , none, all,

1. Given the new utility function, what is the optimal consumption of good?
2. Given the new utility function, what is the optimal consumption of good?