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Choice Problem Set

ECO 301

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14 views

Choice Problem Set

ECO 301

Uploaded by

cs826
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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(Interpret fixed fee as a lump sum tax)


Find a condition on 𝜃, T and M, such that the consumer is indifferent between the two
schemes. (Final answer should be an equation that relates the three parameters.)

Bonus graded question: TAs are requested not to provide help on this question.
[3 points]
A consumer’s utility function is given by 𝒖(𝒙, 𝒚) = −(𝟏𝟎 − 𝒙)𝟐 − (𝟏𝟎 − 𝒚)𝟐 . Price per unit of
each good is 1. It is not compulsory for the consumer to exhaust all income.
a. What will be the optimal consumption with income of 40?
b. What will be the optimal consumption with income of 10?
Note:
If any two answer sheets are found to have identical/near identical answers, both will receive a
zero and be debarred from availing bonus scores.
Clearly write your name and student ID on the answer sheet.
Show all your work in the answer. Clearly mention the equations and the method being used.
Partial credit will be given for the correct approach.
The handwritten answer should be scanned and submitted (in a PDF file) using this form
https://forms.gle/qkSb2szPHThwanrg7 using your SNU email ID. The submissions are due by
Saturday, February 24th, 3 pm. Please do not email your answers.
Rules regarding availing the bonus score are mentioned in the course outline.

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