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Question 1 A consumer spends all his income on the purchase of two commodities X and Y, whose prices are Ksh 30 and Ksh 20
Question 1
A consumer spends all his income on the purchase of two commodities X and Y, whose prices are Ksh 30 and Ksh 20 Respectively. The consumers income is Ksh 12, 000 per month.
- Show relevant budget line and indifference curves indicating the equilibrium position if he/she spending his income equally on each commodity
- what is the effect of an increase in the consumers income by 100% per month
- show what will happen to the consumers equilibrium when the price of x doubles while price of y remains constant
- explain why the marginal rate of substitution declines from left to right along an indifference curve.
Question 2
- Re- state the condition for profit maximization of a firm
- explain why agricultural wages tend to be lower than industrial wages
- explain why wage differentials occur in the same occupation
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