THE UNIVERSITY OF THE WEST INDIES

Faculty of Social Sciences

DEPARTMENT OF ECONOMICS

ECON 1001 - INTRODUCTION TO MICROECONOMICS

(Semester I 2020/2021)

TUTORIAL ASSIGNMENT #1 (Units 1, 2 and 3)

1. a) Describe with the use of an appropriately labelled diagram, the impact of the Covid 19
Pandemic on the Production Possibility Boundary of a Caribbean Country of choice.

b) Explain with the use of the diagram in a) above, how the Pandemic has affected the
Economic Problem; Scarcity; Choice and Opportunity Cost.

2. Create one positive and one normative statement based on each the following topics:
a) Taxes
b) Unemployment
c) Climate Change
d) University

3. The data presented in Table 1 below has the utility schedule of an individual with an income
of $500.00. The individual’s objective is to maximise utility when consuming two products
– Rice and Legumes. You are required to do the following:

(a) Using an appropriate example, explain the law of diminishing marginal utility.
(b) Derive and explain shape of the Total Utility schedule for Legumes and the Marginal
Utility schedule for Rice.
(c) Determine the equilibrium consumption of Legumes and Rice before the price change
in Legumes
(d) Determine the equilibrium consumption of Legumes and Rice after the price change in
Legumes.
(e) Derive the demand curve for Legumes.

Tutorial Sheet #1 ECON 1001, Semester I, 2020/2021 -1-

Table 1
Units Legumes ($100.00) New Price of Rice ($50.00)
Consumed Legumes
(50.00)
TU MU MU/P MU/P* TU MU MU/P
0 0 0
1 1200 500
2 1000 900
3 900 1250
4 800 1550
5 600 1800
6 300 2000
7 200 2150
*Price change from $100.00 to $50.00

4. Assume that Rebecca has an income of $200 per week. Assume also that the weekly cost of
food is $50 and the weekly cost of leisure expenditure is $25. Draw Rebecca's budget line and
then list out and show on the diagram, 3 combinations of food and leisure items which:

(a) leave Rebecca enough money to buy clothes;

(b) completely exhaust her income;

(c) cannot be afforded.

6. a) Explain consumer equilibrium using the concepts of Marginal Utility AND Indifference
Curve Analysis.

b) Explain what is meant by the income effect and the substitution effect of a price change.

c) Describe how the income and substitution effects of a price change differs between types
of goods.

Department of Economics, September 2020.

Tutorial Sheet #1 ECON 1001, Semester I, 2020/2021 -2-