CAS EC 201 Study Guide - Normal Good, Inferior Good, Engel Curve
30 Apr 2014
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Represent with diagrams: suppose a canadian who lives equally close to gas stations in the us and canada. Gasoline can be more expensive over time in one country than in the other due to taxes and, sometimes, prices are also the same. Answer using an indifference curve and a budget line diagram: federal housing assistance programs provide allowances that can only be spent on housing. Several empirical studies find that recipients increase their non-housing expenditures by 10% to 20%. Show that recipients might (but do not necessarily) increase their spending on non-housing, depending on their tastes. A consumer purchases only two goods, apples (a) and oranges (o). The consumer has income of and can buy apples at per pound and oranges at per pound. What bundle maximizes utility: a consumer"s utility function is ( ) the price of is the price of and income is = .
