Question

Part I:Short Answer Questions Exercise 1 (Murphy's Eudget Set) (35 pts) on two connolities: freuch tries sad beef prky The price of a portion of french frirs is $2 and bmfjorky İs$5(per pork). a) Write down Murphy's budget constraint. he maximal coesumptis of freach frs (umber in cald a ral income in termus of french tries) e) Find the maximal numbs of packs of beef yrky poeibly consumed oy Murple (a real income in terms of beef jerky) d) In a two-limsensional cocedinale systre in which beet jeeky is mesoured on the vertical acis sel beuch fries on the horisontal one, dew a sed badlget line Using peucil, shon all the bunles that age afordable (the badeyt see), Where can we finel the quantiatios you oaud in a) and b) on the arapb e) What is the slope of the bodgst line? How wod you inerpeet it 9 Decause of the Mad Co Die, the price of beet jerky of beef). On a separate graph, plot and show how the Murphy's badgst set is to 1o (ds to the sealilr sup affected? Is the shit paralle? What is the new relative price of freach fries in teemis beed jerky? t) Becasuse of severe shortags in the supply of beet, a "Jerky" Bill is passed ty the US Congre allowing each coasumer to parcace at mont 5 packs. Show on the graph howe the sew legislasion aets Murphy's budget ses. Exercise 2 (25 pts) With ounces of steak (S) on the horizontal axis and potatoes (P) on the vertical axis, graphically show indifferences curves representing the following preferences for Hank (a) Hank maust consume exactly 4 ounces of steak per 1 potato. (Assume anything left over of either stesk or potatoes can just be given to the dog.) (b) Hank likes steak and potatoes and prefers to have a good balance of both, but he won't turn down a large helping of either of them. (c) Hank does not like potatoes at all; the fewer the better for him. But he does like steak (d) Hank neither likes nor dislikes potatoes, but he prefers more steak to less steak. (e) Hank is always happy to trade 2 ounces of steak for an extra potato. How is this different from part (a)? Exercise 3 (20 pts) For each of the scenarios in question 2, determine whether the preferences are (i) (strictly) convex and (ii) (strictly) monotonic.