ECO 101

ASSIGNMENT # 4
Deadline: 6th November 2018 (in class)
Total Marks: 25
NO LATE ASSIGNMENTS WILL BE ACCEPTED

1. The table illustrates annual salaries and income tax owed by five individuals. Despite receiving
different and owing salaries and owe different amounts of income tax, these five individuals are
otherwise identical.

Name Monthly Salary (Taka) Monthly Income tax owed (Taka)

Karim 3000 456
Noman 20,000 3,000
Anika 60,000 14,000
Samdina 80,000 22,000

A. Draw this on a graph, with monthly salary on x-axis and monthly income tax owed on y-axis. (4)
B. Calculate the average slope of the curve between the points for Anika’s and Samdina’s salaries
and taxes. Interpret this value for slope? (2)
C. Calculate the average slope of the curve between the points for Karim’s and Noman’s salaries
and taxes using the arc method? Interpret that value for slope? (2)
D. From your interpretation in b) and c), what can you infer about the tax rate? (2)

1. The table below show’s Moin’s cost and benefit from post-graduation studies.

Years of Post-
Graduation Studies Total cost (Tk) Total Benefit (Tk)
0 0 0
1 50,000 100,000
2 110,000 180,000
3 180,000 250,000
4 265,000 290,000

A. Calculate marginal cost and marginal benefit for each additional years of schooling. (2)
B. What is the optimum number of years of post-graduation studies to Moin? (1)
C. Show the marginal cost, marginal benefit and the optimum point in a diagram. (2)
2. Nora needs to buy both pen and candies. Her utility from different consumption bundle is given
below.
Price: 4 taka per pen Price: 2 taka per candy
Total MU per Total MU per
Pen MU Candy MU
Utility taka Utility taka
0 0 0 0 0 0 0 0
1 32 1 24
2 60 2 42
3 84 3 54
4 104 4 60
5 120 5 62

A. Calculate Nora’s marginal utility and marginal utility per taka for each bundle. (4)
B. State is the optimal consumption bundle? (2)
C. Draw the MU per taka for pen and candies in the same diagram, and show the optimal
consumption bundle. (4)