1. Distinguish clearly between the income and the substitution effects of a change in the price of a good. Under what conditions will the income effect and the substitution effect act in opposite directions?
2. Explain the concept of consumer's surplus. Flow does the 'compensating' measure of consumer's surplus differ from the 'equivalent' measure of consumer's surplus? Under what circumstances will both measures give the same result?
3. Outline the theory of the allocation of time between 'work' and 'leisure'. Show how the introduction of welfare payments and income taxes influences the constraints faced by individuals in the labour market.
4. Explain the concepts of full income and full price. Do these concepts help us to explain consumer behaviour?
5. Use a two-period model to explain how people decide to distribute their consumption between 'now' and 'later'. Show how a change in the rate of interest influences the consumer's decision.
6. 'In a perfect capital market the investment decisions of an economic agent will not depend upon his or her rate of pure time preference'. Explain this statement.
7. Show how the theory of choice under conditions of risk can be used to explain the consumer's decision to purchase insurance. State the circumstances in which a consumer will fully insure.
8. Outline the conditions in which the supply price of an industry rises with output (the supply curve is upward sloping). Is it possible for a competitive industry to experience declining supply price? Explain.
9. Distinguish between first, second and third degree price discrimination. Give an example of third degree price discrimination and explain how the prices set by the monopolist are related to price elasticities of demand.
10. Under conditions of monopsony explain how a profit maximising firm will determine its demand for labour. What will be the effect of a minimum wage on such a firm?