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Econ Questions

The document outlines potential exam questions based on microeconomics concepts, including budget constraints, indifference curves, and consumer choices. It features multiple-choice, problem-solving, diagrammatic, and essay questions, focusing on Hurley's consumption of fish and mangoes given his budget and prices. Additionally, it includes tasks for graphing and analyzing changes in budget constraints due to price and income variations.

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Sittie Hasmin Cosane
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16 views8 pages

Econ Questions

The document outlines potential exam questions based on microeconomics concepts, including budget constraints, indifference curves, and consumer choices. It features multiple-choice, problem-solving, diagrammatic, and essay questions, focusing on Hurley's consumption of fish and mangoes given his budget and prices. Additionally, it includes tasks for graphing and analyzing changes in budget constraints due to price and income variations.

Uploaded by

Sittie Hasmin Cosane
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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Based on the provided microeconomics notes, here are some possible exam questions:

---

### **Multiple Choice Questions (MCQ):**

1. **The budget constraint represents:**


a. The maximum amount a consumer is willing to pay for a good.
b. The combinations of goods a consumer can buy given their income and prices.
c. The relationship between the price of goods and consumer satisfaction.
d. The amount of money saved by a consumer.

2. **If the price of mangoes increases while income remains constant, the budget constraint:**
a. Shifts outward.
b. Shifts inward.
c. Pivots inward around the mango axis.
d. Remains unchanged.
*(Correct Answer: c)*

---

### **Problem-Solving Question:**

3. **Hurley has an income of $1200. The price of fish is $4, and the price of mangoes is $1.**
- If Hurley spends all his income on mangoes, how many can he buy?
- If Hurley buys 100 fish, how many mangoes can he afford?
*(Solution: 1200 mangoes; 800 mangoes after buying 100 fish.)*

---

### **Diagrammatic Question:**

4. **Draw an indifference curve for Hurley where he is indifferent between the following bundles of fish and mangoes: (10, 300),
(20, 150), and (30, 100). Show the budget constraint on the same graph if his income is $1200, the price of fish is $4, and the
price of mangoes is $1.**

---

### **Essay Question:**

5. **Explain the relationship between the Marginal Rate of Substitution (MRS) and the slope of the indifference curve. How does
this relate to a consumer's optimum choice?**

---

### Exam Question Utilizing Graphing, Table, and Plotting:

**Hurley’s Consumption Choices**

Hurley has a budget of $1200. The price of fish is $4, and the price of mangoes is $1.
#### **Tasks:**

1. **Table Completion:**
Complete the following table showing the maximum quantity of fish and mangoes Hurley can buy at
different spending levels:

2. **Graph Plotting:**
Using the data from the table, plot the budget constraint on a graph with **fish on the horizontal
axis** and **mangoes on the vertical axis**.

3. **Analysis:**
On the same graph, plot the following bundles and identify if they are affordable, unaffordable, or on
the budget constraint:
- Bundle A: 100 fish and 800 mangoes
- Bundle B: 200 fish and 400 mangoes
- Bundle C: 300 fish and 200 mangoes

#### **Bonus Question:**


What happens to the budget constraint if Hurley’s income increases to $1600? Show the new budget
constraint on the graph.

---

This question requires students to use critical thinking and apply concepts of budget constraints,
graphing, and numerical analysis.

Key answer:

1. b
2. c
3. *(Solution: 1200 mangoes; 800 mangoes after buying 100 fish.)*

Exam Question Utilizing Graphing, Table, and Plotting:


2. Graph Plotting:

Budget Constraint Equation:


Total Income = Price of Fish × Quantity of Fish + Price of Mangoes × Quantity of Mangoes
1200=4F+1M

1200 = 4F + 1M

Rearranging:
M=1200−4F

ANOTHER QUESTIONS:

Question 1: Budget Constraint Shift

Hurley’s income is $1200. The price of fish is $4, and the price of mangoes is $1.

Tasks:
1. Draw Hurley’s initial budget constraint.
2. Suppose the price of mangoes doubles to $2 while the price of fish remains the same. Draw the new budget constraint
on the same graph.
3. Analyze how the change in the price of mangoes affects Hurley’s consumption choices.

Question 2: Indifference Curves and Optimum Consumption

Hurley’s preferences for fish and mangoes are shown by the following bundles on his indifference curve:

 Bundle A: (100 fish, 800 mangoes)


 Bundle B: (150 fish, 600 mangoes)
 Bundle C: (200 fish, 400 mangoes)

Tasks:

1. Plot the points on a graph and draw the indifference curve passing through these bundles.
2. Draw Hurley’s budget constraint if his income is $1200, the price of fish is $4, and the price of mangoes is $1.
3. Identify the optimum consumption bundle where the budget constraint is tangent to the indifference curve.

Question 3: Substitution and Income Effects

Initially, Hurley’s income is $1200, the price of fish is $4, and the price of mangoes is $1. The following
happens:

1. The price of fish drops to $2 while the price of mangoes remains constant.

Tasks:

1. Draw Hurley’s initial budget constraint and his new budget constraint after the price change.
2. On the same graph, illustrate the substitution effect (movement along the same indifference curve) and income effect
(shift to a higher indifference curve).
3. Explain how the two effects influence Hurley’s consumption of fish and mangoes.
Question 5: Giffen Good Hypothesis

Suppose potatoes are a Giffen good for a consumer. The price of potatoes increases from $2 to $4.

Tasks:

1. Draw the initial and new budget constraints, assuming a fixed income of $400 and the price of all other goods at $1.
2. Assume the consumer initially buys 80 potatoes and explain why the consumption of potatoes might increase after the
price rise.
3. Illustrate the effect of the price increase on the graph, showing both substitution and income effects.

KEY ANSWER:

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