The following diagram depicts Julia’s choice of consumption in periods 1 and 2, economics assignment help

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The following diagram depicts Julia’s choice of consumption in periods 1 and 2. She has no income in period 1 and an income of $115 in period 2. The current interest rate is 15%. Based on this information, which of the following statements is correct?

A. The maximum that Julia can borrow to spend in period 1 is $91.
B. If Julia borrows $80 to spend in period 1, she will have $23 to spend in period 2.
C. The consumption choice of $60 in period 1 and $50 in period 2 is a feasible option.
D. The feasible set will be smaller when the interest rate is 10%.

1.0 Points

The diagram depicts Julia’s indifference curve for consumption in periods 1 and 2. Based on this information, which of the following statements is correct?

A. At consumption choice A, Julia places 1.5 times the value of an extra unit of consumption in period 2 as the value in period 1.
B. Julia is impatient at all points on the indifference curve.
C. If Julia was more pure impatient then her indifference curve would be steeper at A.
D. If Julia did not experience diminishing marginal returns to consumption and had no impatience, then her indifference curves would be straight lines with slope exactly equal to -1.

The diagram depicts Julia’s choice of consumptions in periods 1 and 2. She has no income in period 1 and an income of $100 in period 2. In scenario 1 the interest rate is 10%, while in scenario 2 it is 78%. Based on this information, which of the following statements is correct?

A. Julia is able to consume more in period 2 at G under scenario 2 than at E under scenario 1, as her saving earns a higher interest in the former than in the latter.
B. Julia consumes less in period 1 at G under scenario 2 than at E under scenario 1, as she is less impatient at G.
C. The substitution and income effects of the rate rise partially offset each other to result in a lower consumption outcome in period 1 under scenario 2.
D. For this income scenario of no income in period 1 and an income of $100 in period 2, Julia is unambiguously worse off with an interest rate rise

The diagram depicts Marco’s choice of consumptions in periods 1 and 2. He has $100 worth of grain in period 1 and no income in period 2. Marco has two choices. In scheme 1, he can store the grain that he does not consume in period 1. This results in a loss of 20% of the grain due to pests and rotting. In scheme 2, he can sell the grain that he does not consume and lend the money at 10%. Based on this information, which of the following statements is correct?

A. The substitution effect implies that Marco will consume more in period 1 under scheme 2 than under scheme 1.
B. The income effect implies that Marco will consume more in period 2 and less in period 1 under scheme 2 than under scheme 1.
C. Marco will unambiguously consume more in period 2 under scheme 2 than in scheme 1.
D. Marco will unambiguously consume less in period 1 under scheme 2 than in scheme 1.

Tags: ECON Micro Macro

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Explanation & Answer

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1. The following is an order book for News Corp shares. Consider the case where there is a
limit buy order for 650 shares at $16.59, followed by a limit sell order for 600 shares at
$16.55. Based on this information, which of the following statements is correct?
Ans:
A. After the initial limit buy order, there will be 150 shares at $16.59 on the bid side of
the order book.

2. The following diagram depicts Julia’s choice of consumption in periods 1 and 2. She has
no income in period 1 and an income of $115 in period 2. The current interest rate is
15%. Based on this information, which of the following statements is correct?
Ans:
B. If Julia borrows $80 to spend in period 1, she will have $23 to spend in period 2.

3. The diagram depicts Julia’s indifference curve for consumption in periods 1 and 2. Based
on this information, which of the following statements is correct?
Ans:
B. Julia is impatient at all points on the indifference curve.

4. The diagram depicts Julia’s choice of consumptions in periods 1 and 2. She has no
income in period 1 and an income of $100 in period 2. In scenario 1 the interest rate is
10%, while in scenario 2 it is 78%. Based on this information, which of the following
statements is correct?
Ans:

D. For this income scenario of no income in period 1 and an income of $100 in period 2,
Julia is unambiguously worse off with an interest rate rise

5. The diagram depicts Marco’s choice of consumptions in periods 1 and 2. He has $100
worth of grain in period 1 and no income in period 2. Marco has two choices. In scheme
1, he can store the grain that he does not consume in period 1. This results in a loss of
20% of the grain due to pests and rotting. In scheme 2, he can sell the grain that he does
not consume and lend the money at 10%. Based on this information, which of the
following statements is correct?
Ans:
A. The Substitution Effect implies that Marco will consume more in period 1 under
Scheme 2 than under Scheme 1.

Work Outline:
1. The following is an order book for News Corp shares. Consider the case where there is a
limit buy order for 650 shares at $16.59, followed by a limit sell order for 600 shares at
$16.55. Based on this information, which...