Microeconomics Homework 1

October 5, 2023

ˆ Deadline: 10/12, 9:10 a.m.

ˆ 透過 Moodle 提交答案。手寫拍照或是打字皆可。
1. Draw indierence curves that represent the following individuals' preferences for hamburgers and soft drinks.
Indicate the direction in which the individuals' satisfaction (or utility) is increasing.

(a) Allen has CONVEX preferences and dislikes both hamburgers and soft drinks.

(b) Cathy loves hamburgers and dislikes soft drinks. If she is served a soft drink, she will drink it to be
polite. Moreover, she has a CONCAVE preference.

(c) Dave loves hamburgers and soft drinks, but insists on consuming exactly one soft drink for every three
hamburgers that he eats.

(d) Eason likes hamburgers, but neither likes nor dislikes soft drinks. Also, he has a CONVEX preference.

(e) Frank always gets twice as much satisfaction from an extra hamburger as he does from an extra soft
drink.

2. Connie has a monthly income of $260 that she allocates between two goods: meat and potatoes.

(a) Suppose meat costs $4 per pound and potatoes $5 per pound. Draw her budget constraint.

(b) Suppose also that her utility function is given by the equation U (M, P ) = min{M, 2P }. What combina-
tion of meat and potatoes should she buy to maximize her utility?

(c) Connie's supermarket has a special promotion. If she buys 20 pounds of potatoes (at $5 per pound), she
gets the next 10 pounds for free. This oer applies only to the rst 20 pounds she buys. All potatoes
in excess of the rst 20 pounds (excluding bonus potatoes) become $4 per pound. Draw her budget
constraint. What combination of meat and potatoes maximizes her utility?

3. Jane receives utility from days spent traveling on vacation domestically (D ) and days spent traveling on

1s
vacation in a foreign country (F ), as given by the utility function U (D, F ) = 400 + Dα F β . In addition,
the price of a day spent traveling domestically is $100, the price of a day spent traveling in a foreign country
is $400, and Jane's annual travel budget is $4000.

(a) Find Jane's utility-maximizing choice of days spent traveling domestically and days spent in a foreign
country for α > 0, β > 0, and s > 0. Does the answer related to the value of s?
s 1 1
(b) Let U (D, F ) = D +F . Find Jane's utility-maximizing choice for s =
2 and 4 . Does your answer depend
on the value of s? Compare with your answer in part (a). Explain the result.

4. Consider the following situations:

(a) Orange juice and apple juice are known to be perfect substitutes. Draw the appropriate price oer curve
(for a variable price of orange juice) and income oer curve. (Hint: there are several cases.)

(b) Left shoes and right shoes are perfect complements. Draw the appropriate price oer and income oer
curves. Moreover, draw the appropriate demand functions and Engel curves.

5. Suppose for some reasons you own a>0 and b>0 of good 1 and 2, respectively, when you born. These are
called the endowment in economics. Let the market prices beingp1 and p2 .
(a) Write down your budget constraint in math.

1
 (b) What happens to your budget constraint if p1 increases? Draw the graph to explain.

6. Consider the following utility function.

(
9
5 x1+ 27
5 x2 if x1 > 2x2
u(x1 , x2 ) =
4x1 + x2 otherwise

Please calculate the demand function as a function of p1 , p2 , and m.