2012 i. Total Utility of 3 cars 10 + 8+ 6 = 24 3 Bagels spends= $6 Q of Bagels MU Bagels MU / P Bagels $2 Q of Toy Cars MU Toy Cars Cars $1 1 8 4 10 2 7 3.5 3 6 5 2.5 1.5 Step 1 - find MU per $ i. Total Utility of 3 cars 10 + 8+ 6 = 24 3 Bagels spends= $6 5 Toy Cars spends = $5 = total spending = $11 and MU / P = 3

2012 B. If P of wheat increases (input for Bagels) – Supply of Bagels shifts left – her QD will decrease but the Demand is unchanged C. Income elast. = -0.2 = Inferior D. % change QD blocks -4% divided by % change P toy cars 10% = -0.4 complimentary

2009 B A. Peanuts TU from 40 to 48 = MU/P = 8/$1 = 8 Bananas *she is “utility maximizing consumer” i. calculate price of Bananas = $0.50

ii. P of peanuts goes up (bananas P unchanged), how will Sasha’s purchase of peanuts change? If P goes up, then the MU/P must go down (it was 8/$1 = 8…so lets say price goes to $2…then 8/$2 = 4) …so now the MU/P of Peanuts is less than the MU/P of Bananas …so…. Will now consume less peanuts and more bananas

B. Xpelas = positive. Disease destroys bananas What happens to Pe and Qe of peanuts in short run? Xpelas = positive means they are Substitutes. Disease = Supply of bananas to shift left = increase Pe If Pe of bananas (P of related good / substitute) goes up then the D for peanuts increases and Pe goes up and Qe goes up

C. Price of bananas goes up i. substitution effect = idea of Law of Demand …if P goes up, QD goes down…will choose a substitute in place of bananas ii. Sasha’s real income goes down because facing higher prices for goods.