Microeconomics Answers

Given Utility function U=20Q-2Q^2, what quantity of good gives highest utility for the consumer? What will happened if the consumer obtains more quantity than the one you computed?

In the demand function Q= P^0.4 , calculate price elasticity of demand and identify type of good

The price of Kenwood blender increased from ȼ150 to ȼ250. Following the increase in price, quantity demanded of the blender dropped from 500 to 400. Compute the point and arc elasticity of demand

Joe is self-employed in a store that has a rental value of R500 a month which he pays, but he can vacate the building without giving notice. His other expenses are R100 a month for maintenance. He makes R25 000 a year on net sales (total revenue minus the wholesale cost of the product). If he quit his job and worked the same number of hours elsewhere at a job he liked equally well, he estimates that he could make R20 000 a year. No one else can be hired to work in the store.

Suppose that Joe had a long term lease which requires him to pay the rent even if he doesn't operate the store. What should Joe do?

1.   Explain the meaning of a budget line?

B.  Explain the effect of the following on the budget line if money income (a) increases and (b) decreases?

C.     Explain the effect of the following on the budget line if the price of the product shown on the horizontal axis (c) increases and (d) decreases?

Think of an example of a decision problem or a game theory problem. This time you

will have to submit the source of the story. You can take it from a newspaper, from

Internet, magazine, book...

1. Submit a photocopy or a printed version of your problem.

2. Simplify the problem and represent it using the concepts of game theory or

decision theory.

3. Solve it.

4. Compare your results with the real-life results.

5. In case the results do not coincide explain why. Which is the element that the

theory does not reflect?

Explain theoretically and diagramatically, how the market equilibrium will change:

a) simultaneous increase in demand and decrease in supply where both changes are almost equi- proportionate 

b) simultaneous decrease in demand and increase in supply and decrease in demand is relatively more than increase in supply

what is the fundamental problem of economics?

Terry’s utility function over leisure (L) and other goods (Y ) is U(L, Y ) = Y + LY. The associated marginal utilities are MU_Y = 1 + L and MU_L = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same.

(a)   What is the number of hours he would like to have for leisure? (1 marks)

(b)  Determine the MRS of leisure for labour (2 marks)

(c)   Draw a leisure-influenced labor curve (2 marks)

.     Explain what Uber and Careem would like to happen to oil prices in the future and why.                                                                                                            (2 marks)