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Tutorial Set 3 - 2023

This document contains a tutorial on microeconomics and consumer behavior concepts including: 1. A table showing total utility, marginal utility, and average utility that should be completed and graphed to analyze the relationships. 2. Properties of indifference curves and why they do not intersect. 3. A problem involving a consumer with a budget allocating spending on smoothies and movies to maximize utility. 4. Questions involving a consumer's budget line and how it changes with prices and income. 5. Diagramming the income, substitution, and total effects of a price change on different types of goods.

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11 views2 pages

Tutorial Set 3 - 2023

This document contains a tutorial on microeconomics and consumer behavior concepts including: 1. A table showing total utility, marginal utility, and average utility that should be completed and graphed to analyze the relationships. 2. Properties of indifference curves and why they do not intersect. 3. A problem involving a consumer with a budget allocating spending on smoothies and movies to maximize utility. 4. Questions involving a consumer's budget line and how it changes with prices and income. 5. Diagramming the income, substitution, and total effects of a price change on different types of goods.

Uploaded by

nickaryeetey56
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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UNIVERSITY OF GHANA BUSINESS SCHOOL

UGBS 201: MICROECONOMICS AND BUSINESS

TUTORIAL SET THREE

Theory of Consumer Behaviour

1.

Quantity Total Utility (TU) Marginal Utility Average Utility


(MU) (AU)

0 0

1 10

2 9

3 24

4 4

5 30

6 5

7 -2

i. Fill in the blanks for AU, MU and TU


ii. Construct a graph that illustrates MU, AU and TU and analyze the relationship
between MU and AU.
iii. From the graph plotted, what is the relationship be tween MU and TU? Why?

2.

a. Outline the properties of indifference curves


b. Explain why indifference curves do not intersect each other

3. The table shows the marginal utitlity that Alice gets from smoothies and movies. Alice
has GHC 30 a week to spend. The price of a movie ticket is GHC 6, and the price of a
smoothieis GHC 3
Quantity (per week) Marginal Utility from Marginal Utility from
Smoothies movies

1 7 30

2 6 24

3 5 18

4 4 12

5 3 6

6 2 0

a. If Alice buys 4 smoothies a week and sees 3 movies, does she spend all GHC 30?
What is her utility from smoothies and his utility from movies? Does she maximize
his utility? If not, which good must she buy more of?
b. When Alice allocates her budget so as to maximize her utility, what does she buy
and what is the marginal utility per cedi?

4. Desmond consumes two goods (x and y) with a total income of GHS 20 and the price of
thetwo goods are GHS 4.00 and GHS 5.00 for commodity X and Y respectively.

a. Write down the equation of the budget line


b. What is the slope of the budget line?
c. How does the budget line change if the consumer income increases to GHS 40 but
prices remain unchanged?
d. What happens to the budget line if the price of good y decreases to 3 whiles the price
of good x and income remain unchanged?
e. What happens to the budget line if price of good x increases to 7 whiles the price of
good x and income remain unchanged?
f. How much of good x can Desmond consume if he spends his entire income on
that good?
g. How much of good y can Desmond consume if he spends his entire income on
that good?

5. With the aid of a diagram analyse the income, substitution and total effect of a price change on
the following type of goods.(students did not do this in class, tutor will take them through)
a. Normal goods
b. Inferior goods
c. Giffen goods

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