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Assignment 1 27-03-2024

This document contains an assignment with 15 questions related to microeconomics. The questions cover topics like the rule of differentiation, budget constraints, indifference curves, utility maximization, demand functions, and the income and substitution effects.

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32 views

Assignment 1 27-03-2024

This document contains an assignment with 15 questions related to microeconomics. The questions cover topics like the rule of differentiation, budget constraints, indifference curves, utility maximization, demand functions, and the income and substitution effects.

Uploaded by

251789036
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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ASSIGNMENT 1

Code: Econ-201 Section: C


Intermediate Microeconomics Due Date: 27-Mar-2024

Prepare a handwritten solution and submit it on or before the due date.


1. Write down rule of differentiation with one example for each.
2. Aslam thrives on two goods, paperback novels and bananas. The cost of paperback novels is 4 dollars each and
the cost of bananas is 3 dollars per bunch. If Aslam spent all of his income on bananas, he could afford 12
bunches of bananas per week. How many paperback novels could he buy if he spent all of his income on
paperback novels?
3. Your budget constraint for the two goods A and B is 12A + 4B = I, where I is your income. You are currently
consuming more than 27 units of B. In order to get 3 more units of A, how many units of B would you have to
give up?
4. Anjum used to consume 100 units of X and 50 units of Y when the price of X was $2 and the price of Y was $4.
If the price of X rose to $4 and the price of Y rose to $9, how much would Anjum’s income have to rise so that
he could still afford his original bundle?
5. If there are only two goods, if more of good 1 is always preferred to less, and if less of good 2 is always preferred
to more, then indifference curves.
6. Anum has preferences represented by the utility function U(x, y) = 10x + 5y. She consumes 10 units of good x
and 9 units of good y. If her consumption of good x is lowered to 1, how many units of y must she have in order
to be exactly as well off as before?
7. Maha’s utility function is U(x, y) = y + 4x.5. She has 25 units of x and 12 units of y. If her consumption of x is
reduced to 0, how many units of y would she need in order to be exactly as well off as before?
8. Anwar’s utility function is U(x1, x2) = x1x2. His income is $100. The price of good 2 is p2 = 4. Good 1 is priced
as follows. The first 15 units cost $4 per unit and any additional units cost $2 per unit. What consumption bundle
does Anwar choose?
9. Akram’s utility function is U(A, B) = AB, where A and B are the numbers of apples and bananas, respectively,
that he consumes. When Akram is consuming 15 apples and 90 bananas, if we put apples on the horizontal axis
and bananas on the vertical axis, find the slope of his indifference curve at his current consumption.
10. Akhtar has $49 which he decides to spend on x and y. Commodity x costs $5 per unit and commodity y costs $11
per unit. He has the utility function U(x, y) = 3x2 + 6y2 and he can purchase fractional units of x and y. Find out
Akhtar’s optimal choice.
11. Komal’s utility function is U(x, y) = x + 47y − 3y2. Her income is $107. If the price of x is $1 and the price of y
is $23, find out the units of good x that Komal will demand.
12. Hooria consumes only apples and tomatoes. Her utility function is U(x, y) = x2y8, where x is the number of apples
consumed and y is the number of tomatoes consumed. Hooria’s income is $320, and the prices of apples and
tomatoes are $4 and $3, respectively. Find out units of apples she will consume.
13. If Tanvir’s utility function is X 4A XB, the price of apples is pA, the price of bananas is pB, and his income is m,
then find Tanvir’s demand for apples equation.
14. Bilal’s brother Asad has a utility function U(x1, x2) = 16x1/21 + x2. His income is $82, the price of good 1 (nuts)
is $2, and the price of good 2 (berries) is $1. Find out the demand for nuts by Asad.
15. Keeping other things constant, show substitution and income effect under Slutsky equation, if
a. Price of good 1 increases
b. Price of good 1 decreases
c. Price of good 2 increases
d. Price of good 2 decreases

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