Microeconomics Answers

A utility maximizing worker has a budget line with a vertical intercept of 600 dollars and a horizontal intercept of 30 hours. How much non-labour income does this person earn?

i. Why Indifference curve of a rational consumer cannot be parallel to x-axis and y-axis?

A consumer spends all her income on food and clothing. At the current prices of price of food = Rs. 10 and price of cloth = Rs. 5, she maximizes her utility by purchasing 20 units of food and 50 units of clothing.(Hint: Take food on x-axis and cloth on y-axis)
i) What is the consumer’s income?
ii) What is the consumer ‘s marginal rate of substitution of food for clothing at the equilibrium

Explain logically

Why indifference curve of a rational consumer cannot be parallel to x axis and y axis?

Why budget line rotate clock-wise or anticlock-wise?

Explain why demand curve is negatively sloped?

Why budget line rotate clockwise or anticlockwise?

If the supply curve is perfectly elastic and demand is linear and downward sloping, what is the effect of a $1 specific tax collected from producers on equilibrium price and quantity, and what is the incidence on consumers? Why?

Helen’s preferences over CDs (C) and sandwiches (S) are given by U(S,C) = SC + 10(S + C),with MUC = S+ 10 and MUS =C+ 10.If the price of a CD is $9 and the price of a sandwich is $3,and Helen can spend a combined total of $30 each day on these goods, find Helen’s optimal consumption basket.