Exam 7:Revealed Preference-Part A

Twenty years ago,Dmitri consumed bread which cost him 10 kopeks a loaf and potatoes which cost him 18 kopeks a sack.With his income of 230 kopeks,he bought 5 loaves of bread and 10 sacks of potatoes.Today he has an income of 400 kopeks.Bread now costs him 20 kopeks a loaf and potatoes cost him 25 kopeks a sack.Assuming his preferences haven't changed (and the sizes of loaves and sacks haven't changed),when was he better off?

Rudolf Rational obeys the weak axiom of revealed preferences.His preferences don't change over time.One year he could afford bundle x but bought bundle y.If another year he buys bundle x,then he can't afford bundle y.

At prices (p1,p2)= ($4,$1),George buys the bundle (x₁,x₂)=(10,20).At prices (p'₁,p'₂)=($1,$4),he buys the bundle (x'₁,x'₂)= (4,14).At prices (p''₁,p''₂),he buys the bundle (x''₁,x''₂)=(20,10).If his preferences satisfy the strong axiom of revealed preferences,then it must be that

The Laspeyres index of prices in period 2 relative to period 1 tells us the ratio of the cost of buying the period 1 bundle at period 2 prices to the cost of buying the period 1 bundle at period 1 prices.

Prudence is careful to plan ahead.She is going to Paris next year to study.To protect herself from exchange rate fluctuations,she bought a futures contract for the number of francs she plans to spend next year,given current prices.When she arrives in Paris,she can cash in her contract for this many francs no matter what the exchange rate is.If the value of the franc relative to the dollar should happen to fall before she gets to Paris,she

There are two goods,bananas and potatoes.The price of bananas increases and the price of potatoes decreases.If after the price change a consumer (whose preferences satisfy WARP)can still exactly afford her old consumption bundle,then she will consume at least as many potatoes as before,even if potatoes are a Giffen good.

Jose consumes rare books which cost him 8 pesos each and pieces of antique furniture which cost him 10 pesos each.He spends his entire income to buy 9 rare books and 11 pieces of antique furniture.Nigel has the same preferences as Jose,but faces different prices and has a different income.Nigel has an income of 162 pounds.He buys rare books at a cost of 4 pounds each and pieces of antique furniture at a cost of 11 pounds each.

Twenty years ago,Amanda consumed cans of motor oil which cost her 6 pesos each and gallons of gasoline which cost her 14 pesos each.With her income of 112 pesos,she bought 7 cans of motor oil and 5 gallons of gasoline.Today she has an income of 230 pesos.Cans of motor oil now cost 10 pesos each and gallons of gasoline now cost 32 pesos each.Assuming her preferences haven't changed,she

Hillary has an initial endowment of $500 and is interested in two things: how many visits she can make to the doctor and how much money will be left over to spend on other things.When a trip to the doctor costs $60,Hillary sees the doctor 3 times.After health care reform,a visit to the doctor will cost $10 but her taxes will rise by $170.

Recall that the Laspeyres price index (P.I. )uses the old bundle as weights and the Paasche price index uses the new bundle as weights.If the prices of all goods double and your income triples,

Twenty years ago,Dmitri consumed bread which cost him 10 kopeks a loaf and potatoes which cost him 20 kopeks a sack.With his income of 330 kopeks,he bought 9 loaves of bread and 12 sacks of potatoes.Today he has an income of 452 kopeks.Bread now costs him 22 kopeks a loaf and potatoes cost him 17 kopeks a sack.Assuming his preferences haven't changed (and the sizes of loaves and sacks haven't changed),when was he better off?

Pierre's friend Henri lives in a town where he has to pay 3 francs per glass of wine and 5 francs per loaf of bread.Henri consumes 5 glasses of wine and 4 loaves of bread per day.Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine.If Bob has the same tastes as Henri and if the only thing that either of them cares about is consumption of bread and wine,

For a consumer who has an allowance to spend and no endowment of goods,a decrease in the price of an inferior good consumed makes him better off.