# Hw1 Solution

Xavier Vinyals-Mirabent Due: Wednesday, February 1st, 2012.

Solutions to Homework 1.

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1. A consumer has preferences for two goods. Her preferences satisfy Axioms 1 through 4 as discussed in class. A v D v

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E v 5 C v

B v

0 0 5 (a) Plot and label the following bundles: A (2,10) B (6,2) C (0,4) D (8,10) E (4,6) (b) Assume A is indiﬀerent to B (A ∼ B). On a single line, list all the bundles in descending order of preference using ( ) to denote strict preference and (∼) to denote indiﬀerence between adjacent pairs. In other words, use the form: A B C D E Answer: D E A∼B C, or D E B∼A C. 10

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2. Consider an economic agent who has preferences that are represented

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Within Quadrant III, • The M Ux is (positive/negative): negative. • The M Uy is (positive/negative): negative. • The preferences (do/don’t) don’t satisfy the axiom of non-satiation. • The preferences (do/don’t) don’t satisfy the axiom of convexity.

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Within Quadrant IV, • The M Ux is (positive/negative): positive. • The M Uy is (positive/negative): negative. • The preferences (do/don’t) don’t satisfy the axiom of non-satiation. • The preferences (do/don’t) don’t satisfy the axiom of convexity. Within Quadrant I, • The M Ux is (positive/negative): positive. • The M Uy is (positive/negative): positive. • The preferences (do/don’t) do satisfy the axiom of non-satiation. • The preferences (do/don’t) don’t satisfy the axiom of convexity. Within Quadrant II, • The M Ux is (positive/negative): positive. • The M Uy is (positive/negative): negative. • The preferences (do/don’t) don’t satisfy the axiom of non-satiation. • The preferences (do/don’t) do satisfy the axiom of convexity.