CYNTHIA NYAMBURA WAWERU

AGA222-1047/2021

INTERMEDIATE MICRO-ECONOMICS

AER2201

AGRIBUSINESS MANAGENET AND ENTERPRISE

DEVELOPMENT
1) Briefly explain application of indifference curve analysis
The indifferent curve analysis is used in measuring the cost of living or standard of living in
terms of index numbers. We come to know with the help of index numbers whether the
consumer is better off or worse off by comparing two time periods when the income of the
consumer and prices of two goods change.
2) By focusing on giffen goods, use indifference curve analysis to demonstrate and explain the
income and substitution effect
3)
i) Discuss the difference between the law of diminishing marginal returns and the law
of returns to scale
ii) What is the significance of the management and e- commerce policy decision making
process
4) Atieno spend all her income on statistical, software(S) and clothes(C).Her preference can be
represented by the utility function U(S,C)=4In(S)+6In(C)
i) Complete the marginal rate of substitution(MRS) software to clothes (software is on a
vertical axis). Is the MRS increasing or decreasing in S. How do you interpret this?
ii) Find Atieno’s demand function for software and clothes Qs(PsPc, 7) and Qc(Ps Pc,
M) in terms of the price of software(Ps), clothes (Pc) and Atieno’s income M.
iii) Find Atieno’s optimum bundle of software and clothes if her income is Ksh100 and
the price are ksh2 ksh3 for software and clothes respectively
5) What are the assumptions they underline the Law of diminishing equi-marginal utility