Assignment-1
Microeconomics in business
Duration: 4 days
- What is indifference curve? Describe the properties of indifference curve with graph and analysis.
- What does marginal rate of substitution (MRS) mean? Explain graphically.
- Marginal rate of substitution (MRS) between two goods is diminishing; explain
- Establish relationship between Marginal rate of substitution (MRS) and Marginal utility for two goods.
- What is meant by budget line of a consumer? Briefly explain the effect of price or income change on budget line graphically (hints: if price of X increases or decreases, if price of Y increases or decreases and if income increases or decreases).
- What is consumer equilibrium? Show the process of equilibrium of a consumer whose objective is to maximize the utility at a given budget. Show the relevant diagram.
- Explain the consumer’s equilibrium with the help of indifference curve.
- At a certain point of time, if a consumer’s income is tk.500, draw his budget line if he wants to purchase only two commodities X and Y where per unit X and Y can be purchased at tk.25 and tk.50 respectively. What will happen to the budget line if price of X decreased to tk.20?
- A consumer consumes two commodities X and Y. utility function of the consumer is-U=XY.Price of X is tk.10 per unit and price of Y tk.5 per unit. If consumer’s budget is tk.100, find out the equilibrium combination of X and Y while consumer’s level of satisfaction is given at 50 unit
- What is income effect and income consumption curve? Draw an income consumption curve considering two normal goods.
- What is price consumption curve (PCC)? How can we have the Marshallian demand curve from price consumption curve? Show graphically.
- Define the price effect and the income effect. Decompose the price effect into income effect and substitution effect through a diagram and derive the ordinary and new demand curve from the same graph.
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