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Micro Tutorial 1

This document contains 3 passages about microeconomics concepts. The first discusses how a consumer's budget line can be drawn using only the price ratio of two goods and their income. The second is about a consumer using food stamps and calculates the maximum amount of food they can buy. The third draws a budget line for a consumer buying hot dogs and Coke with a bottle cap refund promotion, finding the quantities consumed at points on the line.

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Sachin Singh
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89 views1 page

Micro Tutorial 1

This document contains 3 passages about microeconomics concepts. The first discusses how a consumer's budget line can be drawn using only the price ratio of two goods and their income. The second is about a consumer using food stamps and calculates the maximum amount of food they can buy. The third draws a budget line for a consumer buying hot dogs and Coke with a bottle cap refund promotion, finding the quantities consumed at points on the line.

Uploaded by

Sachin Singh
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Microeconomics - Tutorial 1

1. There are two goods. You know how much of good 1 a


consumer can afford if she spends all of her income on
good 1. If you knew the ratio of the prices of the two
goods, then you could draw the consumer’s budget line
without any more information?

2. Mr. A has an income of $m per week. Let x be food and


let y be all other goods. Let px be the price of food and
py be the price of other goods. He can use food stamps to
buy food at a price of px(1 - s) for up to x* units of food
per week. If he buys more food than x*, he has to pay
the full price px for additional units. His weekly income
is greater than px(1- s)x*. What is the maximum amount
of food that he can buy per week.

3. Brenda likes hot dogs and Coca-Cola. Hot dogs cost $1


each and Cokes cost $.50 per bottle. There is a special
promotion for Coke that will last for one month. If
Brenda sends in the bottle tops from the Cokes she drinks
during the next month, she will get a refund of $.20 for
every bottlecap beyond the first 12 that she returns. For
example, if she returns 25 bottle caps she will get back
$2.60 = $.20(25 - 12). Brenda has $40 to spend on hot
dogs and Coke during the next month. Draw her budget
line with Coke on the horizontal axis and hot dogs on the
vertical axis. Find the points where the budget line hits
the axes and the point where it has a kink. At each of
these three points write down the quantities of each good
consumed.

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