Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 3, Problem 3.10P
(a)
To determine
To discuss:If
(b)
To determine
To explain:Along with diagram, why MRS > 1 when
(c)
To determine
To discuss: If the function is homothetic.
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Define Utility? Discuss law of Equi-marginal utility in detial.
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4) Assume Linda only buys two goods, chicken and rice with her income of M, and prices,
Pc & PR.
a) Graph her consumer choice model (with chicken on thex axis. Nowlet price of chicken
fall, causing Linda to consume more chicken and more rice. Indicate the income and
substitution effects on the graph.
b) Based on your graph from part a, draw Linda’s ordinaly demand (do) and compensated
demand (dc) curves for chicken
c) (True/False) this chicken must be a nomal good. Explain how you know.
d) (True/False) this rice must be a nomal good. Explain how you know.
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