What is microeconomics

Types of microeconomics

Sign in to edit and save changes t... v SCHOOL OF ECONOMICS i COURSEWORK ASSESSMENT TEST ANSWER ALL QUESTIONS TIME: 2 HRS. QUESTION ONE a) Suppose the quantity of goodX demanded by individual 1 and 2 is given X1=10 21"): + (1111+ 0.5PY X2 =1? Px+ 0.0512 + 0.5PY (i) What is the market demand mction to total X {= X1 + X2) as a function. ofo, I], 12 and FY. (ii) Now given the values of some of the variables as follows: I1 = 40, I: = 20. Pig: 4 Give the algebraic equation for the market demand curve for total X. (b) (i) Calculate the point elasticity of demand from the demand functions Q: 1002P+ 10W? atP=10andQ=90 (ii) Given a demand cun'e which is a rectangular hyperbole and with a functional form Q = lip. Show arithmetically that the point elasticity of demand will be unitary throughout the demand curve. (iii) Given the demand and supply functions shown below, calculate the equilibrium price and quantity at which the market clears. Qd = 90 2P (2; = NIP 3 QUESTION TWO | -J a) Suppose that goods X and Y are normal goods with prices P; and P3. respectively. If the consumer has an income I initially, show how this consumer will maximize his or her utility using the indifference curve approach to utility maximization. b) Suppose the price of good X now with all other variables aboTe remaining unchanged, show how we can clearlyr bring out the income and substitution effects of the above change in the price of good X. c) Using diagrammatic exposition show how a consumer reacts to an inferior good as his or her income rises. [n the process dene both an inferior and Giffen. good