Scribd Logo
Încărcați

Bine ați venit la Scribd!

  • F O I Rosi: University of Toronto, ECO 204 Summer 2010

    Încărcat de

    examkiller
    17 vizualizări18 pagini
    This document contains an economics test with two questions and various subparts about consumer choice theory. Question 1 deals with a consumer choosing consumption over two periods with income received in each period and the ability to borrow and save. Question 2 examines utility maximization for a consumer choosing expenditures on two goods and savings, with the consumer facing an income, prices, and maximum savings constraint. The test asks the student to derive demand and optimal choices, calculate elasticities and savings, and determine the effects of policy changes such as taxes on utility.

    Descriere originală:

    Titlu original

    ECO204Y_TT2_2010S

    Drepturi de autor

    © © All Rights Reserved

    Formate disponibile

    PDF, TXT sau citiți online pe Scribd

    Vi se pare util acest document?

    Este necorespunzător acest conținut?

    Raportați acest document
    This document contains an economics test with two questions and various subparts about consumer choice theory. Question 1 deals with a consumer choosing consumption over two periods with income received in each period and the ability to borrow and save. Question 2 examines utility maximization for a consumer choosing expenditures on two goods and savings, with the consumer facing an income, prices, and maximum savings constraint. The test asks the student to derive demand and optimal choices, calculate elasticities and savings, and determine the effects of policy changes such as taxes on utility.

    Drepturi de autor:

    © All Rights Reserved
    Descărcați ca PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    17 vizualizări18 pagini

    F O I Rosi: University of Toronto, ECO 204 Summer 2010

    Încărcat de

    examkiller
    This document contains an economics test with two questions and various subparts about consumer choice theory. Question 1 deals with a consumer choosing consumption over two periods with income received in each period and the ability to borrow and save. Question 2 examines utility maximization for a consumer choosing expenditures on two goods and savings, with the consumer facing an income, prices, and maximum savings constraint. The test asks the student to derive demand and optimal choices, calculate elasticities and savings, and determine the effects of policy changes such as taxes on utility.

    Drepturi de autor:

    © All Rights Reserved
    Descărcați ca PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    din 18

    UniversityofToronto,DepartmentofEconomics

    ECO204Summer2010.AjazHussain

    Test2
    FILLOUTINFORMATIONASITAPPEARSINROSI

    LASTNAME:

    FIRSTNAME:

    MIDDLENAME:

    UTORONTOID#:

    SIGNATURE:

    SCORES
    Question Points Score
    1 50
    2 50
    TOTALSCOREOUTOF100

    YOUMUSTSTAYSEATEDDURINGTHELAST10MINUTESOFTHETESTWAITUNTILALLTESTSARECOLLECTED
    ONLYAIDALLOWED:ACALCULATOR.
    FORYOURCONVENIENCE,THEREISAWORKSHEETATTHEENDOFTHISTEST
    KEEPANSWERSBRIEF.TOEARNCREDIT,SHOWCALCULATIONSANDGIVEARGUMENTSTOSUPPORTYOURANSWERS

    Goodluck!

    Page1of18
    Question1
    Considera2periodeconomywithasinglegood(say,corn).Aconsumerreceivesrealincome
    1
    ,
    2
    (in
    cornunits)atthebeginningofI = 1, 2 respectively.ThepricelevelatI = 1isP
    1
    = 1andtheprice
    levelatI = 2isP
    2
    .Ineachperiod, consumercanborroworlendcornatnominalinterestratei. the
    Assumethattherealinterestrate u.

    Theconsumerhasthefollowingutilityfunction o tiontodayandtomorrow: overc nsump


    u = ln C
    1
    + C
    2

    (a)[5points]Sketchsomeindifferencecurvesinthegraphbelow.Showallrelevantcalculationsneeded
    tosketchthecurvesbelow.

    C
    2
    C
    1

    Page2of18
    (b)[5points]DoesthisconsumerhavestrictlyconvexpreferencesoverC
    1
    andC
    2
    ?Giveabrief
    explanationandifneeded,usethegraphbelow.
    thoutpriorpermission
    Page3of18

    C
    2
    C
    1

    (c)[25points]SolvefortheoptimalchoiceofC
    1
    andC
    2
    .Showallcalculationsbelow.Hint:Whatdothe
    indifferencecurvestellyou?
    Page4of18


    Page5of18

    Page6of18
    (d)[5points]Howmuchwillthisconsumersave(borrow)inI = 1 andI = 2?WhathappenstoS
    1
    and
    S
    2
    whennominalinterestratesrise?Showallcalculationsbelow.
    Page7of18


    (e)[5points]WhatistheelasticityofconsumptioninI = 1 withrespecttotheFutureValueIncome
    (FI)?Showallcalculationsbelow.
    Page8of18


    (f) [5 points] What is the impact on the consumers utility from a 1% income tax on her present value
    income(PI)?Showallcalculationsbelow.

    Page9of18
    Question2
    Aconsumerwithincome$ > u hasthefollowingutilityfunctionovertheexpenditureongood1
    ($E
    1
    ),good2(
    2
    ),andsavings($S):
    u = E
    1
    u

    2
    [
    S
    y

    Theparameterso, [, y > u.The(uniform)priceofgood2isP


    2
    . Governmentregulationslimitthe
    maximumamountofsavingsto$I

    .
    (a)[25points]Solvefortheoptimal$E
    1
    ,
    2
    and$S.Showallcalculationsandstateanyassumptions
    below.

    Page10of18

    Page11of18

    Page12of18
    (b)[5points]Willtheconsumeralwaysconsumestrictlypositiveamountsofgoods1and2?Showall
    calculationsbelow.

    Page13of18
    (c)[5points]Calculateandinterprettheincomeandpriceelasticitiesofgood1.Showallcalculations
    below.

    Page14of18
    (d)[5points]Calculateandinterprettheincomeelasticityofsavings($S).Showallcalculationsbelow.
    Page15of18

    (e)[5points]Trueorfalse:Moremoney,morehappiness?Thatis,willhigherincomemakethe
    consumerhappier?Showallcalculationsbelow.


    Page16of18
    (f)[5points]Supposetheconsumerissavingthemaximumallowableamount.Whatistheimpacton
    herutilityfroma(small)quantitytaxongood1?Showallcalculationsbelow.

    TheEnd

    Page17of18
    Page18of18
    WORKSHEET

    S-ar putea să vă placă și