02 Jun Question 1. (a) Describe in words how a corner solution to th
Question
1. (a) Describe in words how a corner solution to the consumer’s utility maximization problem differs from a conventional solution. Illustrate this description with an appropriate indifference curve diagram. (b) Thinking of your own consumption over the past month, provide one example where your own consumption choices were in the nature of a corner solution.
2 (a) What does addiction mean in terms of indifference curves? Explain in words and with an appropriate diagram. (b) What is the consequence for a person’s pattern of consumption choices if he is addicted to one or more commodities? (c) How would you expect people’s consumption of fish to vary if they have different incomes but they all have the same quasi-linear preferences for fish?
3(a) Provide a definition of loss aversion in words, and illustrate this with an appropriate indifference curve diagram. (b) Give two examples of behavior that would exemplify loss aversion.
4. Explain briefly the conceptual difference between choice based on maximization of a single objective versus choice based on maximization of multiple objectives.
3(a) Provide a definition of loss aversion in words, and illustrate this with an appropriate indifference curve diagram. (b) Give two examples of behavior that would exemplify loss aversion.
4. Explain briefly the conceptual difference between choice based on maximization of a single objective versus choice based on maximization of multiple objectives.
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