,ECS2601 Assignment 1 (COMPLETE ANSWERS) Semester
1 2025 (655050) - DUE 2 April 2025; 100% TRUSTED
Complete, trusted solutions and explanations…WE WISH
YOU ALL THE BEST
ALL QUESTIONS ANSWERED.
Question 1: (15 marks)
1.1 In microeconomics we need to make certain assumptions
about the preferences of consumers. Use real life examples to
explain any two of these assumptions. (4)
1.2 Critically evaluate why the marginal rate of substitution
between two goods must equal the ratio of the price of the
goods, for the consumer to achieve maximum satisfaction. (3)
1.3 Comment on any two of the following topics related to
elasticities: (4)
(a) Arc elasticity of demand
(b) Cross price elasticity of demand
(c) Infinite elastic demand
(d) Price elasticity of supply
1.4 Discuss the likely shape the indifference curves related to
the following items will have
(makes sure to also include a graph in your explanation): (4)
(a)Printers and ink cartridges
(b)A box of chicken wings bought at different take away stores
(you may choose
, which stores! You can also assume that they include the same
number of wings)
Question 1: (15 marks)
1.1: Assumptions about the Preferences of Consumers (4
marks)
In microeconomics, we make certain assumptions about
consumer preferences to simplify analysis and facilitate
economic models. Two of these assumptions are completeness
and transitivity. Let's explain these using real-life examples.
Completeness: This assumption states that consumers can
compare and rank all possible bundles of goods. That is, for
any two bundles, a consumer will either prefer one, be
indifferent between them, or prefer the other.
Example: Imagine you're at a restaurant with two dishes on
the menu: pizza and pasta. According to the assumption of
completeness, you are able to rank these two options in
terms of preference. You may prefer pizza to pasta, or vice
versa, or even be indifferent if both are equally desirable.
Transitivity: This assumption suggests that if a consumer
prefers bundle A over bundle B and prefers bundle B over
bundle C, they should also prefer bundle A over bundle C.
Example: Consider a consumer choosing between three
types of coffee: Espresso (A), Latte (B), and Cappuccino
(C). If the consumer prefers Espresso over Latte and Latte
over Cappuccino, then transitivity implies that the
consumer must prefer Espresso over Cappuccino.
1 2025 (655050) - DUE 2 April 2025; 100% TRUSTED
Complete, trusted solutions and explanations…WE WISH
YOU ALL THE BEST
ALL QUESTIONS ANSWERED.
Question 1: (15 marks)
1.1 In microeconomics we need to make certain assumptions
about the preferences of consumers. Use real life examples to
explain any two of these assumptions. (4)
1.2 Critically evaluate why the marginal rate of substitution
between two goods must equal the ratio of the price of the
goods, for the consumer to achieve maximum satisfaction. (3)
1.3 Comment on any two of the following topics related to
elasticities: (4)
(a) Arc elasticity of demand
(b) Cross price elasticity of demand
(c) Infinite elastic demand
(d) Price elasticity of supply
1.4 Discuss the likely shape the indifference curves related to
the following items will have
(makes sure to also include a graph in your explanation): (4)
(a)Printers and ink cartridges
(b)A box of chicken wings bought at different take away stores
(you may choose
, which stores! You can also assume that they include the same
number of wings)
Question 1: (15 marks)
1.1: Assumptions about the Preferences of Consumers (4
marks)
In microeconomics, we make certain assumptions about
consumer preferences to simplify analysis and facilitate
economic models. Two of these assumptions are completeness
and transitivity. Let's explain these using real-life examples.
Completeness: This assumption states that consumers can
compare and rank all possible bundles of goods. That is, for
any two bundles, a consumer will either prefer one, be
indifferent between them, or prefer the other.
Example: Imagine you're at a restaurant with two dishes on
the menu: pizza and pasta. According to the assumption of
completeness, you are able to rank these two options in
terms of preference. You may prefer pizza to pasta, or vice
versa, or even be indifferent if both are equally desirable.
Transitivity: This assumption suggests that if a consumer
prefers bundle A over bundle B and prefers bundle B over
bundle C, they should also prefer bundle A over bundle C.
Example: Consider a consumer choosing between three
types of coffee: Espresso (A), Latte (B), and Cappuccino
(C). If the consumer prefers Espresso over Latte and Latte
over Cappuccino, then transitivity implies that the
consumer must prefer Espresso over Cappuccino.
