QUESTIONS FOR PRACTICE AND REVIEW TOPIC 2 – THEORY OF CONSUMER BEHAVIOR 1) The price of DVDs (D) is Rs 200 and the price of CDs (C ) is Rs 100. Ajay has a budget of Rs 1000 to spend on the two goods. Suppose that he has already bought one DVD and one CD. In addition‚ there are 3 more DVDs and 5 more CDs that he would really like to buy. a. Given the above prices and income‚ draw his budget line on a graph with CDs on the horizontal axis. b. Considering what he has already purchased and what he
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Optimal Consumption Choice 4 Spending the Marginal Dollar 5 From Utility to the Demand Curve Herriges (ISU) Chapter 10: The Rational Consumer Fall 2010 2 / 28 The Rational Consumer One of the key assumptions underlying economics is the concept of the rational consumer Herriges (ISU) Chapter 10: The Rational Consumer Fall 2010 3 / 28 The Rational Consumer One of the key assumptions underlying economics is the concept of the rational consumer ; i.e.‚ that individuals know what they want and
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3. Suppose that in the absence of trade‚ Home consumes nine cars and two televisions and Foreign consumes two cars and nine televisions. Add the indifference curve for each country to the figures in problems 1. Label the production possibilities frontier (PPF)‚ the indifference curve (U1)‚ and the no‐trade equilibrium consumption and production for each country. Label Home and Foreign’s no‐trade consumption points as A and A*‚ respectively. 4.
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viii Hence 1=1; [pic][pic]………………………………….ix [pic]…………………………………….x The ordinal utility theory uses the indifference curves(IC) to analyze the equilibrium condition of the consumer. Y IC X The consumer aims at consuming at the highest indifference curve. The furthest IC from the origin presents the highest satisfaction of two commodities‚ but is constrained by
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Deriving Demand Functions - Examples1 What follows are some examples of different preference relations and their respective demand functions. In all the following examples‚ assume we have two goods x1 and x2 ‚ with respective prices p1 and p2 ‚ and income m. 1 Perfect Substitutes For perfect substitutes‚ we have to look at respective prices. After all‚ if goods are perfect substitutes‚ then the consumer is indifferent between them‚ and will have no problem adjusting consumption to get
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TIGER AIRWAYS V/S SINGAPORE AIRLINES Tiger Airways and Singapore airlines are two leading airlines in the Singapore region and I would be analyzing the market strategies applied by these to attract the customers. The two parameter to be compared will be 1) Cost Vs Luxury C IC 1 IC 2 C O O S S T T ’ BB’>AA’ A’ A A BB’<AA’ A’
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households will shift toward purchasing raisins from purchasing relatively more expensive goods. This is the substitution effect. Both effects imply that the quantity of raisins demanded will rise as the price of raisins falls. 4. Using indifference curves and budget constraints‚ explain how a consumer maximizes utility. Show how
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of Business‚ Communication & Law (FOBCAL) INTI International University August 2014 Session Faculty of Business‚ Communications and Law INTI International University 1 Class syllabus for Long semester Week 1-3 4-6 Topic Economics Concepts‚ Issues & tools Price Theory ( Demand & Supply) / Individual assignment/ Test 1 7&8 Applications of Price Theory ( Elasticity)/ Group assignment 9 Theory of Consumer behavior 10 Market Failure & Externalities 11&12 Theory of
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Question 1 0 out of 2 points | | | Opportunistic behavior on the part of the employer is possible because:Answer | | | | | Selected Answer: | employees often reduce their effort level if they are important to the company. | Correct Answer: | contracts are often incomplete and leave room for implicit understandings between the two parties. | | | | | Question 2 0 out of 2 points | | | In long-term job attachments‚ a worker’s wage:Answer | | | | | Selected Answer:
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y. • (5) If xPy and yPz‚ then xPz. • (6) If xPy and xIz‚ then zPy. • (7) If xPy and yIz‚ then xPz. • (8) If xIy and yIz‚ then xIz. Continuity axiom states if you prefer A to B and B to C‚ there must be a lottery between A and C that has an indifference between that lottery and B. The axioms that do not mention gambles or probabilities are called ordinal and the ones that do mention gambles or probabilities are called cardinal. If axioms are always followed‚ expected utility will also be maximised
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