Q1) A consumer spends all her income on food and clothing. At the current prices of price of food = Rs. 10 and price of cloth = Rs. 5, she maximizes her utility by purchasing 20 units of food and 50 units of clothing.(Hint: Take food on x-axis and cloth on y-axis)

i)What is the consumer's income?

ii)What is the consumer 's marginal rate of substitution of food for clothing at the equilibrium

Q2)Ali's budget line relating good X and good Y has intercept of 50 unit of good X and 20 units of good Y. if the price of good X is 12, what is Ali's income? What is the price of good Y? What is then slope of budget line?

Q3) Colgate sells its standard size toothpaste for Rs. 25. Its sales have been on an average 8000 units per month over the last year. Recently, its competitor Sparkle reduced the price of its same standard size toothpaste from Rs. 35 to Rs. 30. As a result Colgate sales declined by 1500 units per month.

i)Calculate the cross elasticity between the two products.

ii)What does your estimate indicate about the relationship between the two?

Q4) ) You are given the following marginal utilities of goods X and Y obtained by a consumer. Given that price of X = Rs. 2.5, price of Y = Rs. 1 and income = Rs. 11, find out the optimal combination of goods

No. of unit consumed of a commodity

Marginal utilities of X

Marginal utilities of Y

1

15

10

2

12.5

9

3

10

8

4

7.5

7

5

5

6

6

2.5

5

7

0.5

4

Q5) Suppose the market demand for playing cards is given by the equation

Q = 600 - 100P

Where Q is the no. of decks of cards demand each year and P is the price in Rupee. For a price increase from Rs. 2 to Rs. 3 per deck, what is the price elasticity?