South Westphalia University of Applied Sciences

Bachelor of Business Administration with Informatics

Economics a) – Microeconomics
Prof. Dr. Dina Dreisbach

Summer Semester 2021

Exercise Sheet 6

Task 1 – Indifference Analysis

a) Every Giffen-good is inferior, but not every inferior good is a Giffen-good. Give
reasons for this statement. Conduct a detailed graphical analysis

b) A household maximizes its utility with given income. How does a price reduction of
the first good affect the demand for both goods in case both goods are normal?
Illustrate using a suitable graphic.

Task 2 – Demand and Supply Shocks

The Federal Statistical Office of Germany published the following information about
consumption behavior in information and communication technology for 2010-2019
in Germany: (please see the table below)

a) As can be seen in the table, an ongoing rise in demand for information and
communication technology has occurred. Show graphically how this affects the
respective goods markets and explain! (hint: take one of the mentioned goods markets
as a representative)

b) Even though we observe a rising demand as discussed under a), why do we watch prices
sink for some of the listed products in communication technology in reality? Illustrate
in a separate graphic and explain.

Source: Statistisches Bundesamt, 2020