Exam 6: Revealed Preference

Remember that the Laspeyres price index uses the old quantities for the weights. In 1991, good x cost $5 and good y cost $1. The current price of good x is $7 and the current price of good y is $6. In 1991 the consumption bundle was (x, y) = (2, 4). The current consumption bundle is (x, y) = (5, 3). The Laspeyres index of current prices relative to 1991 prices is closest to which of the following numbers?

Carlos has at one time or another lived in Argentina, Bolivia, and Colombia. He buys only two goods, x and y. In Argentina the prices were ($9, $3) and he consumed the bundle (6, 7). In Bolivia he consumed (9, 2). In Colombia he consumed the bundle (6, 5) at the prices ($3, $3).

Rudolf Rational obeys the weak axiom of revealed preferences. His preferences don't change over time. One year he could afford bundle x but bought bundle y. If another year he buys bundle x, then he can't afford bundle y.

Twenty years ago, Dmitri consumed bread which cost him 10 kopeks a loaf and potatoes which cost him 20 kopeks a sack. With his income of 330 kopeks, he bought 9 loaves of bread and 12 sacks of potatoes. Today he has an income of 452 kopeks. Bread now costs him 22 kopeks a loaf and potatoes cost him 17 kopeks a sack. Assuming his preferences haven't changed (and the sizes of loaves and sacks haven't changed), when was he better off?

Twenty years ago, Dmitri consumed bread which cost him 10 kopeks a loaf and potatoes which cost him 18 kopeks a sack. With his income of 230 kopeks, he bought 5 loaves of bread and 10 sacks of potatoes. Today he has an income of 400 kopeks. Bread now costs him 20 kopeks a loaf and potatoes cost him 25 kopeks a sack. Assuming his preferences haven't changed (and the sizes of loaves and sacks haven't changed), when was he better off?

Prudence is careful to plan ahead. She is going to Paris next year to study. To protect herself from exchange rate fluctuations, she bought a futures contract for the number of francs she plans to spend next year, given current prices. When she arrives in Paris, she can cash in her contract for this many francs no matter what the exchange rate is. If the value of the franc relative to the dollar should happen to fall before she gets to Paris, she

Stan Ford currently spends $100 a week on entertainment. A rich uncle offers him a choice between a $50 a week allowance and the opportunity to buy all of his entertainment at half price. Stan has no kinks in his difference curves. Stan would

Patience was maximizing her utility subject to her budget constraint. Prices changed and Patience was less well off than before. Therefore, at the old prices her new bundle must cost less than her old bundle.

Pierre's friend Henri lives in a town where he has to pay 3 francs per glass of wine and 6 francs per loaf of bread. Henri consumes 9 glasses of wine and 4 loaves of bread per day. Bob has an income of $15 per day and pays $.50 per loaf of bread and $2 per glass of wine. If Bob has the same tastes as Henri and if the only thing that either of them cares about is consumption of bread and wine,

If Goldie chooses the bundle (6, 6) when prices are ($6, $2) and the bundle (10, 0) when prices are ($2, $5),

The Laspeyres price index differs from the Paasche price index because the Paasche index holds prices constant and varies quantities, while the Laspeyres index holds quantities constant and varies prices.

A consumer's behavior was observed in three situations with different prices and incomes. In situation 1, she chose a bundle that cost $1,600. In situation 2, she chose a bundle that cost $2,500. In situation 3, she chose a bundle that cost $3,100. The bundle purchased in situation 2 would cost $1,200 at situation 1 prices. The bundle purchased in situation 3 cost $2,000 at situation 2 prices. This consumer's behavior is known to satisfy the strong axiom of revealed preference. Therefore, the bundle purchased in situation

At prices ($4, $12), Harry chooses the bundle (9, 4). At the prices ($8, $4), Harry chooses the bundle (2, 9). Is this behavior consistent with the weak axiom of revealed preference?

At prices (p₁, p₂) = ($4, $2), Ivan buys the bundle (x₁, x₂) = (8, 20). At prices = ($2, $4), he buys the bundle = (10, 13). At prices , he buys the bundle = (14, 11). If his preferences satisfy the strong axiom of revealed preferences, then it must be that

If the government gave you a subsidy of $100 per month that you had to spend on housing and if you could spend the remainder of your income in any way you wished, the effect of the subsidy would differ from the effect of a $100 per month unrestricted increase in your income only if

If Goldie chooses the bundle (6, 6) when prices are ($6, $2) and the bundle (10, 0) when prices are ($5, $5), Aif(P2 > 4)]

It is possible for a consumer to satisfy the weak axiom of revealed preference but violate the strong axiom of revealed preference.

Franco and Gianni have the same tastes and consume only two goods, wine and pizza. Franco lives in Milano and spends 100,000 lire per week. It costs him 5,000 lire for a bottle of wine and 5,000 lire for a pizza. Gianni lives in Napoli. It costs him 4,000 lire for a bottle of wine and 6,000 lire for a pizza. At those prices, he chooses to buy 10 bottles of wine and 6 pizzas per week.