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  • Econ130 Tutorial 2

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    Gurkiran Kaur
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    This document contains a tutorial on consumer choice with the following information: 1) Part 2 contains multiple choice questions on consumer choice topics. 2) Part 3 defines key concepts like production possibility frontier and opportunity cost. It provides an example of calculating slope and opportunity cost. 3) Part 3 also explains how to derive the budget line equation from total budget (M), prices of goods (PX and PY), and quantities of goods (QX and QY). It gives an example of a specific budget line calculation.

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    This document contains a tutorial on consumer choice with the following information: 1) Part 2 contains multiple choice questions on consumer choice topics. 2) Part 3 defines key concepts like production possibility frontier and opportunity cost. It provides an example of calculating slope and opportunity cost. 3) Part 3 also explains how to derive the budget line equation from total budget (M), prices of goods (PX and PY), and quantities of goods (QX and QY). It gives an example of a specific budget line calculation.

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    85 views5 pages

    Econ130 Tutorial 2

    Uploaded by

    Gurkiran Kaur
    This document contains a tutorial on consumer choice with the following information: 1) Part 2 contains multiple choice questions on consumer choice topics. 2) Part 3 defines key concepts like production possibility frontier and opportunity cost. It provides an example of calculating slope and opportunity cost. 3) Part 3 also explains how to derive the budget line equation from total budget (M), prices of goods (PX and PY), and quantities of goods (QX and QY). It gives an example of a specific budget line calculation.

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    © All Rights Reserved
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    ECON130 TUTORIAL 02

    Consumer Choice

    Part 2: Multi Choice

    MC1. d

    MC2. b

    MC3. d

    Part 3: Structured Questions

    Q0. Refresher

    (a) Production possibility frontier is a graph that shows all combinations of goods and services that
    can be produced if all the society’s resources are used efficiently. For each level of the output of one
    good, the PPF shows the maximum amount of other good that can be produced. The slope of the
    PPF curve is called Marginal rate of transformation and is the opportunity cost between the
    production of good X and good Y i.e. two goods. It is the rate at which one good must be sacrificed
    to produce an additional unit of another good.

    (b) At point A good Y = 3 and good X = 6.5 and at point B, good Y = 2 and good X = 8.5.

    Slope = Opportunity cost = Rise / Run i.e. -1/2 = -0.5

    Q1. Budget lines

    (a) PXQX + PYQY = M

    PYQY = M- PXQX

    QY = M – PXQX/ PY (Then, rewrite this in the form of a +bx)

    M PX
    – Q
    P Y PY X

    (b) Suppose PX = 10, PY = 5 And M = $100


    ECON130 TUTORIAL 02
    ECON130 TUTORIAL 02
    ECON130 TUTORIAL 02
    ECON130 TUTORIAL 02

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