Exam prep · Year 2 McGill style · intermediate level
9 problems
micro, macro, s
tatistics
McGill
Year 2 practice Full solutions
every step worked o
ut
Intermediate micro, intermediate macro and probability: choice, strategy,
growth, policy and inference.
Unofficial practice based on public course descriptions for this level. Not affiliated with or
endorsed by McGill University.
, Micro · Problems 1 to 3 McGill · Year 2 style
Income and substitution effects
Problem 1 Problem 2 Problem 3
Slutsky decomposition Compensating variation Engel curve
U = xy. Income $120, py = $1. px falls Same consumer and price change. Same preferences, px = $2, py = $1.
from $4 to $2.
1. Utility before the change? 1. x as a function of income I?
1. x before and after? 2. Income needed at px = $2 for that 2. Income elasticity of x?
2. Substitution effect (Hicks)? utility?
3. Income effect? 3. Compensating variation?
Unofficial practice · Solutions on the next page · McGill Year 2 style · 02
9 problems
micro, macro, s
tatistics
McGill
Year 2 practice Full solutions
every step worked o
ut
Intermediate micro, intermediate macro and probability: choice, strategy,
growth, policy and inference.
Unofficial practice based on public course descriptions for this level. Not affiliated with or
endorsed by McGill University.
, Micro · Problems 1 to 3 McGill · Year 2 style
Income and substitution effects
Problem 1 Problem 2 Problem 3
Slutsky decomposition Compensating variation Engel curve
U = xy. Income $120, py = $1. px falls Same consumer and price change. Same preferences, px = $2, py = $1.
from $4 to $2.
1. Utility before the change? 1. x as a function of income I?
1. x before and after? 2. Income needed at px = $2 for that 2. Income elasticity of x?
2. Substitution effect (Hicks)? utility?
3. Income effect? 3. Compensating variation?
Unofficial practice · Solutions on the next page · McGill Year 2 style · 02
