Econ 211 - Microeconomic Theory I
Quiz #2
Assist. Prof. Idil Göksel
1. Suppose a dairy farmer produces 30 liters of milk a week. Initially the price of the milk is
5YTL. His demand function for milk, for his own consumption is
X1 = 20 + (m/10p1)
Now suppose that the price of milk changes to 3YTL. Find the endowment income effect.
2. Ali’s net demands for goods 1 and 2 are (2, -3) and his endowment is (6,5). What are his gross
demands?
3. Veli has an endowment of 5 units of good x and 10 units of good y. He can buy and sell x at a
price of 50YTL and y at a price of 100YTL. He receives an income of 1000YTL as wage.
a) Calculate the amount of x that he could afford if he bought only x and the amount if y he
could afford if he bought only y.
b) Write an equation for Veli’s budget.