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College of Business Management ECO 101 Principles of Microeconomics Assignment # 6

This document contains an economics assignment from the College of Business Management. The assignment has 4 questions related to consumer choice and budget constraints. Question 1 asks students to draw and analyze different consumer budget lines based on changes to income and prices. Question 2 asks students to define the 4 assumptions of consumer preferences. Question 3 asks students to draw indifference curves and explain 4 properties. Question 4 asks students to calculate and explain the marginal rate of substitution.

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Maham Farooqui
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9 views

College of Business Management ECO 101 Principles of Microeconomics Assignment # 6

This document contains an economics assignment from the College of Business Management. The assignment has 4 questions related to consumer choice and budget constraints. Question 1 asks students to draw and analyze different consumer budget lines based on changes to income and prices. Question 2 asks students to define the 4 assumptions of consumer preferences. Question 3 asks students to draw indifference curves and explain 4 properties. Question 4 asks students to calculate and explain the marginal rate of substitution.

Uploaded by

Maham Farooqui
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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INSTITUTE OF BUSINESS MANAGEMENT

COLLEGE OF BUSINESS MANAGEMENT

ECO 101 Principles of Microeconomics

Assignment # 6

1. A consumer has income of $3,000. Soft Drink costs $3 per glass, and cheese costs $6 per
pound.
a. Write an equation of the budget constraint.
b. Draw the consumer’s budget line. What is the slope of this budget line?
c. Show, what happens to the budget line if the consumer’s income increases to $6000 and the
prices remain unchanged. What happened to the slope? Explain.
d. Show, what happens to the budget line if the price of Soft Drink increases to $6 while income
and price of cheese remain unchanged. What happened to the slope? Explain.

2. Write and Explain the four assumptions of preferences.

3. Draw a consumer’s indifference curves for Soft Drink and cheese. Describe and explain four
properties of these indifference curves.

4. Pick a point on an indifference curve for Soft Drink and cheese and show the marginal rate of
substitution. What does the marginal rate of substitution tell us?

Note: The Assignment should be hand written on the foolscap sheets and a scanned copy in PDF should be uploaded on LMS
or Computer typed.

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