[ Cobecon ] Problem Set 2 PDF

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De#La#Salle#University# School#of#Economics# COBECON#K37# Problem#Set##2# ! Instructions:!! ! SUBMISSIONS#THAT#FAIL#TO#FOLLOW#INSTRUCTIONS#WILL#NOT#BE#MARKED.## ! All! solutions! and! final! answers! should! be! handwritten! on! a! short! bond! paper.! Answers! should! be! written! in! chronological! order.! Answers# should# include# complete#solutions#-#meaning#formulas#and#if#necessary,#graphs#to#substantiate# your# answer.! For! example,! simply! answering! TRUE! to! Statement! #1! even! if! it! is! correct!will!not!merit!any!point!in!the!absence!of!a!complete!explanation.!Box#your# final#answers.!No#solution,#no#points.! ! At#the#end#of#your#problem#set,#write#the#honor#code#statement#provided#after# Item##10#and#sign#your#name#and#the#date#you#signed#it.# I#will#not#check#your# problem#set#if#it#does#not#include#this.# # Problem#sets#must#be#scanned#and#collated#into#a#single#pdf#file#then#uploaded# onto# the# Canvas/AnimoSpace# Assignment# Submission# Portal# on# or# before:# AUGUST#11,#2021#5pm.# ! # TRUE!OR!FALSE!(10!points!each):! 1. Higher!indifference!curves!yield!higher!utility.! 2. Left!shoes!and!rights!shoes!are!perfect!complements,!thus,!their!indifference! curve!is!a!downward!sloping!straight!line.! 3. Indifference!curves!are!downward!sloping!since!preferences!are!transitive.! 4. The!optimal!point!of!consumption!is!the!bundle!of!goods!that!will!give!the! consumer!the!highest!level!of!savings.! ! Continue#to#next#page.# ! ! ! ! ! ! ! ! ! ! ! !

Use!this!figure!for!#5,!#6!and!#7.!

! ! 5. Bundle!F!is!not!an!optimal!bundle!for!consumption!because!the!utility!is!too! high.! 6. The!utility!derived!from!consuming!Bundle!B!is!exactly!equal!to!the!utility! derived!from!Bundle!A.! 7. A!price!increase!in!good!x!will!cause!optimal!point!of!consumption!to!change! from!Bundle!C!to!Bundle!B.! ! Continue#to#next#page.# # ! ! ! ! ! ! ! ! ! ! ! # # # # # !

Use!this!for!#8!and!#9.!

# # Suppose!that!the!initial!optimal!point!of!consumption!is!Bundle!A,!and!the!new! optimal!point!of!consumption!is!Bundle!C.!! 8. The!change!in!consumption!of!goods!x!and!y!from!Bundle!A!to!Bundle!C!is! brought!about!by!a!decrease!in!price!of!good!y.! 9. The!substitution!effect!is!shown!by!the!movement!from!Bundle!A!to!Bundle!B! due!to!a!change!in!purchasing!power!of!the!consumer.! ! ! 10. The!marginal!effect!shows!the!change!in!consumption!brought!about!by!a! change!in!the!relative!price.! ! # # Honor#code#statement:# ! I,!(write!your!full!name!here)!,!hereby!certify!that!I!worked!on!this!problem!set!on!my! own.!I!did!not!collaborate!with!anyone!in!completing!this!problem!set.!I!did!not!copy! off!my!classmates’!work.!I!did!not!pay!anyone!or!request!anyone!to!do!any!part!of!this! work! I! am! currently! submitting.! I! also! did! not! share! any! copies! of! my! answers! to! anyone.!! ! Sign!here:!______________________________! !!!!!!Write!your!full!name!and!date.#...