advertisement

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.