ECS2601 ASSIGNMENT 1 SEMESTER 2 2020
1. An indifference curve can be upward sloping.
[1] True
[2] False
Explanation: An indifference curve is a graph showing combination of two goods that give the
consumer equal satisfaction and utility. Each point on an indifference curve indicates that a
consumer is indifferent between the two and all points give him the same utility.it is convex and
downward sloping
2. The two utility functions given below generate identical demand functions for goods X and
Y:
a. U(X,Y) = log(X) + log(Y)
b. U(X,Y) = (XY)0.5
[1] True
[2] False
Explanation: The shape of the demand curve depends on the utility function. Utility function with
the same marginal rate of substitution (MRS) will going to generate the same demand curve for
the goods. The reason behind this is that to find the demand curve first we need the optimum
condition. If utility functions have the same MRS then their optimum condition would be the
same and will generate the same demand curve.
MRS of the utility functions U(X, Y) = log(X) + log(Y) is calculated below
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https://www.coursehero.com/file/75114165/ECS2601-ASS-1-SEMESTER-2-2020Pdocx/
, MRS of the utility function U(X, Y) =(XY)0.5
3. Engel curves always slope upward.
[1] True
[2] False
Explanation: Engel curves always slope upwards. False. If the good is inferior, then as income
increases, quantity demanded decreases, and therefore the Engel curve slopes downwards. If
the price of one of the goods increases, explain the effect on the quantity demanded of each of
the goods.
This2study source was downloaded by 100000840403022 from CourseHero.com on 03-04-2022 15:19:26 GMT -06:00
https://www.coursehero.com/file/75114165/ECS2601-ASS-1-SEMESTER-2-2020Pdocx/
1. An indifference curve can be upward sloping.
[1] True
[2] False
Explanation: An indifference curve is a graph showing combination of two goods that give the
consumer equal satisfaction and utility. Each point on an indifference curve indicates that a
consumer is indifferent between the two and all points give him the same utility.it is convex and
downward sloping
2. The two utility functions given below generate identical demand functions for goods X and
Y:
a. U(X,Y) = log(X) + log(Y)
b. U(X,Y) = (XY)0.5
[1] True
[2] False
Explanation: The shape of the demand curve depends on the utility function. Utility function with
the same marginal rate of substitution (MRS) will going to generate the same demand curve for
the goods. The reason behind this is that to find the demand curve first we need the optimum
condition. If utility functions have the same MRS then their optimum condition would be the
same and will generate the same demand curve.
MRS of the utility functions U(X, Y) = log(X) + log(Y) is calculated below
This study source was downloaded by 100000840403022 from CourseHero.com on 03-04-2022 15:19:26 GMT -06:00
https://www.coursehero.com/file/75114165/ECS2601-ASS-1-SEMESTER-2-2020Pdocx/
, MRS of the utility function U(X, Y) =(XY)0.5
3. Engel curves always slope upward.
[1] True
[2] False
Explanation: Engel curves always slope upwards. False. If the good is inferior, then as income
increases, quantity demanded decreases, and therefore the Engel curve slopes downwards. If
the price of one of the goods increases, explain the effect on the quantity demanded of each of
the goods.
This2study source was downloaded by 100000840403022 from CourseHero.com on 03-04-2022 15:19:26 GMT -06:00
https://www.coursehero.com/file/75114165/ECS2601-ASS-1-SEMESTER-2-2020Pdocx/
