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Recitation Assignment 1 - 2025

The document outlines a recitation assignment with a total of 75 marks, requiring students to submit their solutions by March 7th. It includes six questions covering economic wellbeing analysis, indifference curves, budget constraints, and utility maximization. Plagiarism and late submissions will incur penalties.

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madihasohail588
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50 views3 pages

Recitation Assignment 1 - 2025

The document outlines a recitation assignment with a total of 75 marks, requiring students to submit their solutions by March 7th. It includes six questions covering economic wellbeing analysis, indifference curves, budget constraints, and utility maximization. Plagiarism and late submissions will incur penalties.

Uploaded by

madihasohail588
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Recitation Assignment # 1

Total Marks: 75

You are required to turn in ONE Word document with your solutions to ALL questions on LMS by FRIDAY,
7th March, 9 am (LMS), and turn in your hard copy to the TA at 3pm, by FRIDAY, 7 th March as well. There
is no tolerance for plagiarism and late submissions will be subjected to a penalty.

Question 1: [20
marks]

Consider the table below consisting of data on different characteristics for analyzing the economic
wellbeing in 8 South Asian countries:

Use the table below to answer parts a-e


Average annual Primary
Labor force
Fertile land (sq. GDP (constant 2008 Population, Disposable Real interest school
Nation GDP (present US$) participation
km) US$) total Income per capita rate (%) enrollment,
rate (%)
(US $) (% gross)

Afghanistan 379,100 35,383,128 400 48.52 9.42 102.49


20,206,376,461.0 19,362,642,267.0
Bangladesh 91,942 157,970,840 321 56.6 3.45 105
167,771,375,851.0 221,415,162,446.0
Bhutan 5,190 736,709 167 66.1 9.36 102.66
2,188,590,422.0 2,158,972,129.0
India 1,797,210 1,324,509,589 502 50.34 6.23 114.54
2,484,425,233,783.0 2,294,797,978,292.0
Maldives 79 475,513 350 67.62 10.52 99.43
3,628,864,087.0 4,379,136,462.0
Nepal 41,210 27,261,131 191 83.39 7.23 144.49
19,891,395,830.0 21,185,922,408.0
Pakistan 368,440 203,627,284 508 52.83 8.32 91.32
227,557,064,469.0 278,654,637,738.0
Sri Lanka 27,400 21,203,000 485 55.01 5.39 101.47
79,917,480,155.0 82,401,038,710.0

a) Amongst these characteristics from the table, which indicator(s) best assess the
performance of economy. Describe briefly.
b) Is the following claim, “GDP (current US $) is relatively an accurate statistic to measure
economic wellbeing than GDP (constant 2008 US $)” true or false? Provide explanation to
your answer.
c) More often, literature provides another useful statistic, “GDP per capita” to contrast
wellbeing in different economics. How do we measure GDP per capita and why is it
preferred over GDP?
d) By computing the Real GDP per capita for all the nations in the above table rank them on
this statistic in descending order.
e) Based on your answer in part d), can we form a link that lower the value of GDP per capita,
greater the inequality in an economy? Do you agree with this? Why or why not?

Question 2: [10
marks]

Unit 1 of Core e-book suggests that living standards around the world remained fairly stagnant up until
1800s. It was after the 1800 that living improved significantly in Britain and gradually the rest of the
world caught up. The book shows these changes using a Hockey-stick diagram:

Describe two significant reasons which had led to the long flat section of the hockey stick diagram
suddenly turn upwards.

Question 3: [15 marks]

Draw a set of Indifference curves (an indifference map) to represent preferences and use arrows to
depict the direction of increasing utility. You should provide 2-3 lines for your diagrams:

a) Ali detests going to the cinemas to watch movies (x-axis) but loves going to watch cricket matches (y-
axis) during his free hours.

b) Jamila is indifferent when it comes to her preference for a recreational places (y-axis) but she really
enjoys selecting the type of activity (x-axis) that she and her friends would want to play.

c) Zahid hates studying for Economics (x-axis) but neither derives positive utility or negative utility from
studying for Sociology (y-axis) instead.
Question 4: [5 marks]

Suppose your budget constraint is c = w(12 - t) + m, where c is your maximum level of consumption, w is
your hourly wage, t is hours of leisure time, and m is income from your investments. Assume m is strictly
positive. If your budget constraint is drawn with with t on the horizontal axis and c on the vertical axis.

a) What is the slope of the budget constraint


b) Calculate MRT
c) Draw the budget constraint
d) A higher m reduces the opportunity cost of free time?

Question 5: [15 marks]

Using a well-labelled diagram, for a well-behaved preference structure plot the optimality condition for
utility maximization (MRS = MRT). Explain why MRS > MRT and/or MRS < MRT are not optimality
conditions. (Note: use the conceptual significance of slopes and what they mean to answer the latter
part of this question).

Question 6: [10 marks]

Suppose a consumer with utility function and income m=4. Initially, the price of
each of goods is one, p1=p2=1. Then, the price of good 1 decreases to p1’=1/2. Using this information,
compute and draw the income and substitution effects.

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