Assignment for introduction to economics

1. Discuss the economic system in Ethiopia over the recent three regimes (EPRDF, Derg and
imperial regime)
2. What are the exceptions for the law of demand?
1/ 2
3. Suppose that the consumer utility function is given by U =10 X Y 1/ 4 . Compute both MRSxy and
MRSyx. Is there any difference between the two?
4. Suppose a consumer consuming two commodities X and Y has the following utility function

U =X 0 . 4 Y 0 . 6 . If price of good X and Y are 2 and 3 respectively and income constraint is Birr 50.
A. Find the quantities of X and Y which maximize utility.
B. Show how a rise in income to Birr 100 will affect the quantity of X and Y.

5. Assume a hypothetical consumer consumes good X and good Y. The price of good X is 1
and price of good Y is 3 and the consumer budget is birr 10 for the two goods. Where: Q X is
quantity of good X QY is quantity of good Y and TUX and TUY is total utility from
consuming good X and good Y respectively.

QX TUX QY TUY
0 0 0 0
1 10 1 24
2 19 2 45
3 27 3 63
4 34 4 78
5 40 5 87
6 44 6 90

Based on the given information answer the following questions.

A. Compute the marginal utility of the two goods
B. At what amounts of consumption does diminishing marginal utility starts to occur for the two
goods?
C. Determine the quantities of the two goods that the consumer should buy in order to maximize his
total utility
6. Suppose a consumer has income of 200 birr per month and he wants to spend all of his income on
two goods- X and Y whose prices are birr 4 and birr 5 respectively. Based on this information answer
the following questio
A. Compute the equation of the budget line.
B. Draw the budget line
C. Determine the slope of the budget line and interpret the result
D. What will happen to the original budget line?
i. If money income doubles.
ii. If the price levels increases by 50%.
iii. If price of good Y doubles.
7. The total cost function of a firm is given by c = 100 + 40 q + 5q2.
A. Find Total fixed cost
B. Find the Marginal cost equation and the marginal cost of the 5th unit

C. Find Average variable cost equation and the AVC of the 4th unit

D. Find average fixed cost equation and the AVC of the 6th unit

E. Find average total cost equation and the ATC of the 3rd unit

8. Discuss the relationship between production and cost both graphically and algebraically.