EXERCISES PART I ANSWERS

Transcription

1 UNIVERSIDADE CATÓLICA PORTUGUESA Faculdade de Ciências Econóicas e Eresariais MICROECONOMICS II nd seester 006/007 EXERCISES PART I ANSWERS Fernando Branco Carolina Reis

2 . Introduction. Preferences and utilit function Solved in class.. Consuer s coice and deand ) ) 3) z No ótio: TMS 0 0 TMS TMS 4) 0 5 5) ) ) + TE 0077 TE TE q 8) b q a b 9) ; ; d) 0 90 e) 36

3 f) * * A B 75 6 C D 4 6 0) ) ) d) 5 05 > e) f) TMS A- Ordinar Good B- Ordinar Good C- Ordinar Good D- Perfectl Inelastic Deand E- Ordinar Good A- Substitute Goods B- Unrelated C- Coleentar Goods D- Coleentar Goods E- Coleentar Goods 4 TMS B O t t 3) Bot would accet te ecange in bot circustances. 4) 0 3; 7 3 0; /7 < 4 0 3

4 5) i) 846 ii) 48 6 P.3 Substitution and Incoe Effects ) ) 3) 4) SE -565 IE SE - IE -3 Yes. d) U T 03 U J 0(3) kf T F d) F e) T Inferior Good IE: Noral Good IE: Ordinar Good TE: Inferior Good IE: Giffen Good TE: 5) Not necessaril it deends on te IE. 6) SE -565 IE

5 P P U P P U d) SE -35 IE -8 7) 8) T 9) T F d) F 05 3 (6) 95 8 U > U 0) 055(9) > 0 Te goods classification would cange.. Dualit Consuer Teor ) VER: α α ; - d) α eu ( ) U ln + α α α α ; U α ln α e) α ; α α ; U α ln α 5

6 ) v ( ) ln + α α α eu ( ) U ln + α α α γ γ v γ γ 3) 4) - e U γ γ d) w γ γ γ w γ γ e) IOC: γ f) - POC: d d U 0 ( γ ) 04; 5 ; 6 5) He cannot be aiizing Utilit in bot cases. 6) 7) 8) 0 a ; 0 b ; a+ b ab05 b b + a ab v b + a U a a b + a U b 6

7 9) e U + a b a IOC: b a > ; 0 b a < 0; b a b a b v a a U ; 0 b a > a U < 0; b b a U a b b b e a U in a > VER: 0 b a b 0) b < VER : 0 3. Toics in Consuer Teor 3. Te sul of labor ) Otial Coice: 9; l C + 7w 7

8 ) - 3) 4) Yes it is ossible tat Jon decides not to work. He will work ore in Setúbal. d) He igt decide to work or not to work. Eiter wa e will be worse off. - wt X z * ( w) w X w T d) < 0 zx e) X wt X X wt Otial Coice: l 8; z 8 New budget line: c+ 5l 0 Otial Coice: l 7; z 9 5) Otial Coice: l 8; c 84; z 3 Corner Solution: l 35; c 65; z 75 6) Tere is onl a substitution effect. Unless references are Leontief Melissa will cange er decision in wic case se will be better off. 7) It deends on references. 8) s z T 0 z w d) * z * z * z ) s z T( α) α w X s ( α) w z > 0 X < T α α X w T ( α) 8

9 zw zx α X w( α) T αx α X w( α) T αx 3. Interteoral Consution ) C 4(54); C 84 3 ( C ) 5 ( + r) 5 * * * 3 ( C) ( C ) 5 5 ( + r) d) r 50% e) C 0; C 89 f) TMS ( + r) TMS > ( + r) g) r 0% TMS ( + r) ) Not necessaril. 3) He will accet rojects if z X > ( + r). 4) Possible Corner Solutions: C Y; C C 0 C 0 Y 3.3 Revealed Preference ) Preferences are not transitive. ) Not consistent. Consistent. 3) It is consistent wit WARP. 4) Situation 3: 9

10 4 Situation : 0; Yes. An oint in te BC: Welfare Measure ) CV 396 EV 4 CSV 773 CV 60 EV 5 CSV 90 ) 3) EV 99 Laseres Incoe Variation 50 (Slutsk Coensation) Minial aount EV 607 Subsid Paasce Incoe Variation 40 CV 63 Ta Laseres Incoe Variation 8 CSV 609 d) Quasi-linear Preferences: Good as no IE. 4) ( U ) ( U ) 0 Tus: CV EV CSV 6 EV Paasce Incoe Variation 36(36) CV Laseres Incoe Variation 6(6) CSV 305 d) Leontief Preferences: no SE. Hicksian deand curves are vertical lines. 5) T F 0

11 6) 7) Deends on te tariff. Tariff U 598 > 580 Te consuers will agree wit te councilor s idea. - Indeendent Councilor: (Laseres) incoe variation 9 - Maor: Incoe variation 5 Te refer to vote for te indeendent councilor. d) A 08 A