UNC-Chapel Hill ECON 101 - Problem Set 2 (3 pages)

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Problem Set 2



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Problem Set 2

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Pages:
3
School:
University of North Carolina at Chapel Hill
Course:
Econ 101 - Introduction to Economics

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Washburn Phillip Suzi Q s Budget 100 90 80 Used Books 70 60 50 40 30 20 10 0 0 15 30 45 60 Bagels Washburn Economics 101 Problem Set 2 1 The demand for a normal good increases as income increases and decreases as income decreases The demand for an inferior good decreases as income increases and can increase as income decreases a Normal Goods Sperry s and hamburgers b Inferior goods one ply toilet paper and spam Sperry s and Hamburgers are normal goods because as I make more money I will want to buy more of each good because I like both of those things The toilet paper and spam are inferior goods because I only buy those things when I cannot afford a better product As I make more money I no longer need to buy the inferior good and can then simply buy a smaller quantity of the corresponding normal good 2 ply toilet paper and steak If my income doubled then I would buy more Sperry s and hamburgers and would buy much less possibly 0 one ply toilet paper and spam 2 a My total utility from four slices of pizza is greater than that of two because while I get less enjoyment from a piece of pizza than I did from the one before it I still gain some utility from the fourth piece b The marginal utility of the second piece is greater than that of the fourth piece because by the time I get to the fourth piece I ve already eaten much pizza and it is nothing new However when I got my second slice I had only had one up until that point so I get greater use from it 3 D Washburn Beefy T shirts 90 80 A 70 B Quantity 60 50 40 30 C 20 10 0 1 2 3 4 5 6 7 8 9 10 Price Individual Market 4 The slope of the indifference curve is the marginal utility of the good on the X axis over the marginal utility of the good on the Y axis All bundles on the indifference curve are seen as equal to each other by the consumer The slope shows how much more of one good would need to be given up in order for the consumer to feel that the bundle is as good with one more unit of the other good 5 a P Q 10 0 b 9 10



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