Microeconomics

Prof. Wiszkidenszky

1. Open question (4 points)

Alex’s total budget to spend for BigMac and Coca-Cola is €2000.

Budget constraint of Alex

BigMac

250

200

150

100
b3
50 b2

0
0 100 200 300 400 500 600 700 800 900 1000
Coca-Cola

A. What is the price of BigMac and what is the price of Coca-Cola?

BigMac = 10 € Cola = 2 €
B. What happens to the budget constraint of Alex, if his income decreases to half?
(Draw or describe with words where the new budget constraint will take place)
B2
C. What happens to the ORIGINAL budget constraint, if the price of BigMac
increases to double and Coke’s price remains the same? (Draw or describe with
words where the new budget constraint will take place)
B3

1
Microeconomics
Prof. Wiszkidenszky

2. Open question (5 points)

Calculate and characterize the income elasticity of demand of the cinema tickets, if an
increase in the income from € 1,000 to € 3,000 causes a raise of cinema visits from 16
to 24 a year.
(Write the formula, calculate the elasticity and characterize it, eg. elastic, inelastic,
unit elsatic)

IED= (Q2-Q1)/[(Q2+Q1)/2]
(I2-I1)/[(I2+I1)/2]

IED= (24-16)/20 / (3,000-1,000)/2,000 = 40%/100%= 0,4

Income elasticity of demand is inelastic.

3. Open question (3 points)

What happens to the demand curve of the smartphone market, if ...

A. the number of the potential buyers diminishes drastically

The curve shifts to the left
B. the income of the potential buyers rises fast
The curve shifts to the right
C. the price of the smartphones decreases
The curve remains unchanged, there is only movement along the curve

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Microeconomics
Prof. Wiszkidenszky

1. Open question (3 points)

What happens to the supply curve of the apple market, if ...

D. the number of the farmers increase drastically

The curve shifts to the right
E. a new technology boost the quantity of apple
The curve shifts to the right
F. the price of the apple decreases
The curve remains unchanged, there is only movement along the curve

2. Open question (4 points)

Jane’s total budget to spend for Cinema and Gym is € 600.

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Microeconomics
Prof. Wiszkidenszky

D. What is the price of a Cinema ticket and what is the price of the Gym session?
Cinema = 20 € Gym = 20 €
E. What happens to the budget constraint of Jane, if her income increases to €
800? (Draw or describe with words where the new budget constraint will take
place)
B2 (40, 40)
F. What happens to the ORIGINAL budget constraint, if the price of the Gym
decreases to half and the Cinema ticket price remains the same? (Draw or
describe with words where the new budget constraint will take place)
B3 (30, 60)

3. Open question (5 points)

In a fast food restaurant the price of the hamburger has been increased from € 1.50
to € 2.50. As a result, the amount of french fries sold decreased from 10,000 to 6,000
portion. Calculate and characterize the Cross-Price Elasticity of Demand.
(Write the formula, calculate the elasticity and characterize it, eg. elastic, inelastic,
unit elsatic)

Ep= (6000-10000)/8000 / (2,5-1,5)/2 = -50%/50%= -1

Cross-Price elasticity of demand is unit elastic.

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Microeconomics
Prof. Wiszkidenszky

1. Open question (5 points)

The average price of the Vienna-London discount flight tickets has been raised from €
80 to € 120. As a result, the daily purchase falls from 500 to 300. Calculate and
characterize the Price Elasticity of Demand.
(Write the formula, calculate the elasticity and characterize it, eg. elastic, inelastic,
unit elsatic)

(Q2-Q1)/[(Q2+Q1)/2]
(P2-P1)/[(P2+P1)/2]

Ep= (300-500)/400 / (120-80)/100 = -50%/40%= -1,25

Price elasticity of demand is elastic.

2. Open question (3 points)

What happens to the supply curve of the oil market, if ...

G. due to a natural disaster many supplier shot down production

The curve shifts to the left
H. a new technology boost the production
The curve shifts to the right
I. the price of the oil increases
The curve remains unchanged, there is only movement along the curve

3. Open question (4 points)

Katie’s total budget to spend for Cinema and Gym is € 300.

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Microeconomics
Prof. Wiszkidenszky

G. What is the price of a Cinema ticket and what is the price of the Gym session?
Cinema = 6 € Gym = 5 €
H. What happens to the budget constraint of Katie, if her income decreases to
half? (Draw or describe with words where the new budget constraint will take
place)
B2 (25,30)
I. What happens to the ORIGINAL budget constraint, if the price of the Cinema
increases to double and the Gym price remains the same? (Draw or describe
with words where the new budget constraint will take place)
B3 (25, 60)