1. 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 = 24
3 Bagels spends= $6
5 Toy Cars spends = $5 = total spending = $11
and MU / P = 3

2. 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. = =
Inferior
D. % change QD blocks -4% divided by % change P toy cars 10%
= complimentary

3. 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

4. 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

5. 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

6. 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.