Dr. Coughlin
Econ 306
Homework 3

I. Questions 1-3 are T/F. Question 4 is multiple choice. ( 1 point for each of Questions 1-4)

II. Please complete the homework 3 problems on the Aplia Website. (2 points each)


1. If there are two goods with positive prices and the price of one good is reduced, while income and other prices remain constant, then the size of the budget set is reduced.

2. If good 1 is measured on the horizontal axis and good 2 is measured on the vertical axis, and if the price of good 1 is p1 and the price of good 2 is p2, then the slope of the budget line is -p2/p1.

3. If all prices double and income triples, then the budget line will become steeper.

4. Nicole spends her entire budget and consumes 10 units of x and 15 units of y. The price of x is twice the price of y. Her income doubles and the price of y doubles, but the price of x stays the same. If she continues to buy 15 units of y, what is the largest number of units of x that she can afford?

(a) 20
(b) 10
(c) 22
(d) 24
(e) There is not enough information to say.