What is the sufficient condition for both consumers

Reference no: EM133340735

Questions:

1. Separate the substitution effect from the income effect for a perfect substitute indifference curve for a decrease in the price of a normal good. Assume that MRS Px/Py. Identify the income and substitution effect.

2. Using your understanding of the Edgeworth box, what is the sufficient condition for both consumers to be on the optimal acceptable exchange curve? Explain the contract curve.

3. Separate the substitution effect from the income effect for a perfect complement indifference curve for an increase in the price of a normal good. Identify the income and substitution effect.

4. Graphically show a diagram of a firm making a loss in the short run under perfect competition. Make sure to indicate the area that represents the firm's loss.

5. Explain the relationship between the marginal cost and marginal product of labor. Relate your answer to the diminishing marginal product of labor.

6. Show by indifference curve analysis with a budget line on the choice of one couple not to have children and of another couple with the same income and facing the same costs of having and raising children deciding to have children. Make sure to explain how you arrived at your answer.

1. Derive the demand curve showing both the uncompensated demand curve and compensated demand curve for a price decrease of a Giffen good. Why is the uncompensated demand curve shaped the way it is in your graph?

2. Separate the substitution effect from the income effect for a perfect complement indifference curve for a decrease in the price of a normal good. Identify the income and substitution effect. Furthermore, derive its compensated and uncompensated demand curve. Why is the compensated demand curve shaped the way it is in your graph?

3. Suppose a person has a choice between their health as a good and risky behavior as a good in the COVID pandemic, such as large social gatherings indoors. Additionally, assume that masks reduce the price of risky behavior. Using indifference curves and budget lines, identify the substitution effect between health and risky behavior given a decrease in the price of risky behavior. Place risky behavior on the x-axis and health on the y-axis. What type of good risky behavior must be in order to worsen someone's health? What type of good risky behavior must be in order to improve someone's health? Explain your answer.

Reference no: EM133340735

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