Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter B, Problem 3RQ
Exercise B3
Why are indifference
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Increase in the price of insulin doesn't effect its Qd whereas a slight increasein price of perfume drops its Qd to zero. Explain.
Can you measure your own utility
Exercise 3
An individual lives two periods, 0 and 1. The income is 14,000 in period 0 and 5,000 in period 1.
The individual's marginal utility is: K- Co in period 0 and d8(K – C1) in period 1, where C is the
consumption in period 0, C1 the consumption in period 1 and d a discount rate. K is a constant
(higher than the consumption in each period). Suppose that the person can save or borrow from
the bank from period 0 to period 1 with a 25% interest rate. Set the discount rate & to 0.8.
a) How much will the individual consume in the two periods? How much will she save?
b) A National Insurance scheme (pension system) is established. The individual must pay 4,500
in period 0 and receives the same amount with interests in addition to her income in period 1.
What will the consumption and savings be in the two periods if the National Insurance scheme
uses the same interest rate as the bank?
Chapter B Solutions
Principles of Economics 2e
Ch. B - Exercise B1 What point is preferred along an...Ch. B - Exercise B2 Why do indifference curves slope down?Ch. B - Exercise B3 Why are indifference curves sleep on...Ch. B - Exercise B4 How many indifference curves does a...Ch. B - Exercise B5 How can you tell which indifference...Ch. B - Exercise B6 What is a substitution effect?Ch. B - Exercise B7 What is an income effect?Ch. B - Exercise B8 Does the income effect involve a...Ch. B - Exercise B9 Does a change in price both an income...Ch. B - Exercise B10 Would you expect, in some cases, to...
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- Exercise B10 Would you expect, in some cases, to see only an income effect or only a substitution effect? Explain.arrow_forwardExercise B6 What is a substitution effect?arrow_forwardExercise B9 Does a change in price both an income effect and a substitution effect? Does a change in income have income effect and a substitution effect?arrow_forward
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