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Curve Budget Line Diagram, Intermediate Microeconomics - Economics - Exam

Exams, Micro Economics

Post: January 29th, 2013
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This lecture is from Intermediate Microeconomics. Key important points are: Curve Budget Line Diagram, Intermediate Microeconomics, Price of Heating Oil, Heating Oil, Price Change, Budget Line Flatter, Initial Optimum, Curve Budget Line, Manager of a Firm, Expansion Path
This lecture is from Intermediate Microeconomics. Key important points are: Curve Budget Line Diagram, Intermediate Microeconomics, Price of Heating Oil, Heating Oil, Price Change, Budget Line Flatter, Initial Optimum, Curve Budget Line, Manager of a Firm, Expansion Path
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Last Name______________________ First Name___________________________ Intermediate Microeconomics Final [150 points] Clearly label all graphs for full credit and please write legibly; I cannot grade what I cannot read. Show your work for full credits. The number of points each question is worth in parentheses. 1. (20) Last year, the price of heating oil was $4 per gallon, and Jennifer purchased 100 gallons of heating oil. This year, the price of heating oil falls to $3 per gallon while Jennifer's income is unchanged. Jennifer decides to share her good fortune by giving her retired father a gift of $100. Consider an indifference curve-budget line diagram with heating oil on the horizontal axis and "all other goods" on the vertical axis. (i) (4) Does the price change make Jennifer's budget line flatter or steeper? Justify your choice. (ii) (6) After Jennifer gives the $100 gift, will her new budget line lie above, lie below, or pass through her initial optimum? Justify your choice...

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