Economics Department, Faculty of Economics and Political Science English Section, Second Year Cairo University Intermediate Microeconomics

Theory Fall 2013 Dr. Heba Nassar, Dr. Abdel-Hameed Nawar Mr. Ahmed Ragab, Ms. Nesreen Selim

Answer Key to Tutorial (3) on Chapter 3: Preferences

I. TRUE-FALSE: 123456False False True False True False

II. MULTIPLE CHOICE QUESTIONS: 123456789e b c b c d e c e

III. QUESTIONS AND PROBLEMS: 1&2- Solved in the section 3- Consider two Indifference Curves and which intersect at bundle . Bundles and are on and bundles and are on .

From, . From , . The transitivity then implies that and we see . But this is a contradiction.

. But from

4- The answer is in the book p. 45-47 in section (3.5). 5- If every commodity is a good, this means that more of every commodity is preferred to less. Referring to the figure below, if we start at a bundle (x1, x2) and move anywhere up and to the right (increasing quantities of either of the 2 goods or both), then we must be moving to a preferred position. If we move down and to the left (decreasing quantities of one of the 2 goods, or both), then we must be moving to a worse position. So if we are moving to an indifferent position, we must be moving either left and up or right and down. So the indifference curve must have a negative slope.