Microeconomics Answers

If the cross elasticity of demand between X and Y is negative, then are X and Y 

substitutes or complements? Explain your answer.

What is a Pareto superior allocation? When is an allocation said to be Pareto improving? At what point is Pareto Efficiency reached. What is a Pareto superior allocation? When is an allocation said to be Pareto improving? At what point is Pareto Efficiency reached. 

Assume that you are an enterpreneur of a hotel what are the fixed and variable costs to be carried out in that business

Discuss the main features of the Ricardian Theory of Rent. How do these contrast with the Modern Theory of Rent?

Maryam Inc. produces leather bound books. The market is highly competitive, with books currently selling for R600. Maryam’s total and marginal cost curves are: TC = 3 000 + 100Q2 MC = 200Q Calculate Maryam Inc.’s profit maximising quantity. Is the firm earning a profit? / Mary

Why are economic problems and issues difficult to resolve? In this time of covid-19 pandemic and its variants, what microeconomic options are available to individuals and consumers in their quest for goods and resources given the loosening of restrictions in the months to come? Cite three major options considered to be necessity for individuals and consumers alike.

Currently, Paula is maximizing utility by purchasing 5 TV dinners (T) and 4 Lean Cuisine meals (L) each week.

Graph Paula’s initial utility-maximizing choice.

Suppose that the price of T rises by $1 and the price of L falls by $1.25. Can Paula still afford

to buy her initial consumption choices? What do you know about her new budget constraint?

Use your graph to show why Paula will chooseto consume more L and less T given her new budget constraint. How do you know that her utility will increase?

Some economists define the ‘‘substitution effect’’ of a price change to be the kind of change shown in part c. That is, the effect represents the change in consumption when the budget constraint rotates about the initial consumption bundle. Precisely how does this notion of a substitution effect differ from the one defined in the text?

If the substitution effect were defined as in partd, how would you define ‘‘the income effect’’ in order to get a complete analysis of how a person responds to a price change?