Economics of Enterprise Answers

1) A consumer has a utility function given by

ln U = 5 ln x1 + 3 ln x2

if the budget constraint is given by

10x1 + 14x2 = 124, find

i) the optimal quantities of the two goods that the consumer should purchase in order to maximise utility, subject to the budget constraint.

ii) the value of the consumer’s marginal utility of money at the optimum

iii) the marginal rate of substitution (MRS) of x1 for x2 and determine its direction at the optimal

An increase in demand results in which of the following changes in the commodity’s equilibrium 

price and quantity?

A. Price rises and quantity falls.

B. Price falls and quantity rises.

C. Price and quantity both rise.

D. Price and quantity both fall.

Which one of the following is not related to GDP

A. It measures the current production only.

B. It measures the values of final goods and services produced within the country.

C. It includes gross private domestic investment in capital goods.

D. It takes into account final goods and services only.

MC curve and AC curve are the mirror reflections of

A. AVC and AFC.

B. AVC and TVC.

C. MP and AP.

D. TP and AP.

Explain whether or not you agree with the following statement: “A company has R500 million in a deposit account with a local bank. In terms of economic theory, this represents capital to the firm

us A numerical example to explain the difference between the rate of change and the level of change between two values. 

let f(x) = (6x+3) and g(x)=(-2x+5)

*use chain rule to calculate h'(x) where h(x)=f(g(x)

given that the quantity demanded for the particular good is 40 unit price per unit of P7, derive the demand equation assuming that when the selling price decreased to P5, the quantity demanded for this commodity increased to 60 units.