Exam 1

Question 1

MRT is equal to

Answer 1

MRT = -p.1 / p.2 and is equal to the slope of the budget line, you can get this because the axes are q.1, q.2 so intercepts are y/p.1 and y/p.2

Question 2

MRS is equal to

Answer 2

• (delU / delq.1) / (delU / delq.2)

Question 3

Utility is maxed when:

Answer 3

1. MRS = MRT
2. Y = p.1q.1 + p.2q.2

Question 4

Demand function q.1 =

Answer 4

q.1 = f(Y, p.1)

Question 5

e (elasticity) is equal to

Answer 5

%deltaQ / %delta(p,p.alt,Y,etc.)
= (delQ / Q) / (delP / P)
= (delQ/delP) * (P/Q)

Question 6

d p.d / d T =

Answer 6

(e.s / e.s - e.d)
= elasticity of supply / (elasticity of supply - elasticity of demand)

Question 7

Increase in alternate price? How to solve?

Answer 7

find dP/dP.alt when Q.s = Q.d, find p=C+a*p.alt to help you find dQ/dP.alt

Question 8

Expenditure function f:

Answer 8

Y = f(U,p.1,p.2) AKA cost to get U utils at these prices.