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Give as many reasons as you can why we believe that indifference curves are convex and explain.
What implications does their result have for calculating the effects of an increase in the federal cigarette tax on the quantity demanded?
Can an indifference curve be downward sloping in one section, but then bend backward so that it forms a "hook" at the end of the indifference curve?
Assuming that consumers maximize their utility, which city's consumers have a higher marginal rate of substitution of avocados for tangerines?
Can you confidently predict whether she'll buy relatively more expensive gym shoes after the tariff? Why or why not?
If he has no other source of income, draw his budget constraint and write the equation. What is the most he can spend, Y, on these goods?
Arthur views chocolate as a good but is neutral about bread, in that he doesn't care if he consumes it or not. Draw his indifference curve map.
Miguel considers tickets to Houston Grand Opera and Houston Astros baseball games to perfect substitutes. Show his preference map. What is his utility function?
What happens to the budget line if the tax applies only to purchases of gasoline in excess of 10 gallons per week?
What happens to a consumer's optimum if all prices and income double? (Hint: What happens to the intercepts of the budget line?)
Show the original and new budget constraint. What can you say about the bundle Ralph will choose when faced with the new constraint?
Describe his indifference curves. Given the tax, Earthlink raised its price for the phone service but not its cable service.
Illustrate the logic of the endowment effect using a kinked indifference curve. Let the angle be greater than 90°.
Why would you go to the pool more or fewer times than if you did not join? For simplicity, assume that the price of all other goods is $1.
If she receives $100 in food stamps and $200 in a housing subsidy (which she can spend only on housing), how do her budget line and opportunity set change?
Show that recipients might (but do not necessarily) increase their spending on nonhousing, depending on their tastes.
How will the gasoline-purchasing behavior of a Canadian who lives equally close to gas stations in both countries change?
Show why a person is more likely to buy some savings (put money in a retirement account) as the person's income rises.
Goolsbee (2000) found that people who live in high sales tax areas. Use an indifference curve-budget line diagram to illustrate the reason for his results.
What is the budget constraint facing an individual if that individual may buy up to $100 per month in food stamps at 15¢ per each $1 coupon?
Does the introduction of the frequent-buyer card necessarily encourage Jim to consume more coffee? Show how your answer depends on Jim's preference map.
Draw Fiona's indifference curves. Which of our usual assumptions are violated by this example?
What can you say about the elasticities of supply and demand? What can you infer about the demand elasticity from observing effect of a tax on change in price?
List the conditions (in terms of the elasticities or shapes of supply or demand curves) that are consistent with 100% pass-through of the taxes.
Is the incidence of a tax on fish, which is sold in a competitive market, greater for him than for other people?