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MICROECONOMICS (FINAL DELIVERY)

TUTOR

SALAMANCA OLMOS MARISOL

GRANCOLOMBIANO POLYTECHNIC UNIVERSITY INSTITUTION

MICROECONOMICS

2020

Content
MICROECONOMICS (FINAL DELIVERY)....................................................................................1
TUTOR..........................................................................................................................................1
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SALAMANCA OLMOS MARISOL.................................................................................................1

GRANCOLOMBIANO POLYTECHNIC UNIVERSITY INSTITUTION...........................................1
MICROECONOMICS.....................................................................................................................1
2020...............................................................................................................................................1
Content................................................................................................................................................1
INTRODUCTION...........................................................................................................................3
GOALS..........................................................................................................................................4
General objective...............................................................................................................................4
Specific objectives..............................................................................................................................4
a. U(X,Y) =2X+5Y.............................................................................................................................9
BIBLIOGRAPHIC REFERENCES...............................................................................................16
INDEX OF ILLUSTRATIONS......................................................................................................17
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INTRODUCTION

Microeconomics is the science that studies the economic behavior of individual agents, it

is characterized by individual rationality, each of the basic rationalities is motivated by the

pleasure of maximizing their pleasure or benefit, such as consumers , companies , workers and

the investors ; as well as their interrelation in the markets . The basic elements on which

microeconomic analysis focuses are goods , prices , markets and economic agents.

In the following work we will analyze through graphs, examples and arguments how

consumer behavior, producer behavior and the different aspects that surround these two variables

for study work.

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GOALS

General objective

Analyze consumer behavior according to the satisfaction of unlimited needs, study of the

producer's behavior, identifying short- and long-term production costs and market forms.

Specific objectives

 Know the consumer and the principle of maximum results

 Learn about consumer studies under the ordinalist approach

 Know Generalities about the substitution effect and income effect

 Know the alteration of the producer's equilibrium point due to changes in input prices

 Know the short and long term production costs

1.Suppose that you reach your equilibrium along an indifference curve with a slope equal to -

100/x2, and you have an income of US$60, to spend on goods X and Y, whose prices are Px= 2;

Py=2; with this information:

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to. Find the quantities of goods X and Y that you must consume to maximize your

satisfaction.

To find maximum satisfaction, the entire budget must be spent with the relationship of goods,

that is:

X ∗ Px+Y ∗ Py=US $60

However, we have an equation with two unknowns, therefore, the information on the slope of

the indifference curve or marginal rate of substitution of X with respect to Y is used:

TMgSCxy= − UMgX
UMgX

There are no marginal units of

UMgX = UMgY or what is the same UMgX = Px

Px Py UMgY Py

Plugging the price ratio into the slope of the indifference curve

TMgSCxy = - 100 _ UMgX = - Px = - 2

X UMgY Py 2

-100 = -2
x2

100 = 1
x

x = 10
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With the value of X and Y, which must be consumed to maximize satisfaction are 10 and 20

respectively.

b. Graph and explain the equilibrium situation using the ordinalist approach.

Illustration 1: Representations point 1.b

2. Your 6-year-old son likes chocolate bars and hates spinach. You give him 2 bars of

chocolate a day and his mother gives him an additional bar of chocolate for every 50 grams of

spinach I consume per day. Under these conditions, your child eats 75 grams of spinach and 3.5

bars of chocolate. With this information:

Consider:

2 chocolate bars a day

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1 Chocolate bar for every 50g of spinach you eat.

a. Tell what kind of goods chocolate bars and spinach are for your child.

The type of goods that I give to my son are economic goods, and those that the mother gives

him are free goods because this varies depending on the consumption of spinach.

c. Assume a budget and locate the consumer's break-even point.

The chocolate consumption budget is fixed for me and variable for the consumption of

spinach. Each chocolate-spinach has a value of $60, the variable cost per unit (unitary) is $40,

the fixed cost is $8500.

d. Analyze your child's balance intake.

The breakeven point calculation would be: $8500 / ($60 – $40) = 425. Therefore, 400 units

need to be sold at $60, that is, $24,000 in sales to reach the break-even point and not go to a loss.

3. Suppose a seller follows the following pricing policy for good X. The price, Px= 20 for the

first 200 units, and Px= $5 per unit for all subsequent units. Assume that good Y is sold at the

constant price of Py=10, with this information:

to. Draw the budget line for a consumer who has followed the previous sales policy and has

an income of $5000.
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x 0 50 100 150 200 1000

AN 500 400 300 200 100 0

Illustration 2: Representations point 3.a

b. Is it possible to have more than one consumer equilibrium point in such a situation?

It is not possible to reach any equilibrium point, it does not meet the conditions of

equimarginality, drawing the budget line we can see that it never consumes the same quantities

of one good with respect to the other. On the other hand, the slope of the budget line is not equal

at any point to the slope of the indifference curve. The fact that the price of

4. Which of the following utility functions are consistent with convex indifference curves. For

your answer, analyze each of the following functions.

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We now represent the functions:

a. U(X,Y) =2X+5Y

10−¿2
U 10=10=2 X +5 Y 2 X +5 Y −10=0 AND¿ X
¿
5

20−¿2
U 20=10=2 X +5 Y 2 X +5 Y −20=0 AND¿ X
¿
5

U 10 U 20
x AND x AND
0 2 0 4
2'5 1 5 2
5 0 10 0

Illustration 3: Representations point 4.a

This utility function is not strictly convex, since they are straight linear.
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U10 U20
X Y X Y
0´5283 3 0´6069 3
0'7925 2 0'9103 2
1 1’5849 1 1’8206
1’5849 1 1’8206 1
2 0’7925 2 0’9103
3 0’5283 3 0’6069
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Illustration 4: Representations point 4.b,c

It is a strictly convex utility function.

This utility function is not strictly convex

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Illustration 5: Representations point 4.d

5. The following information refers to a farmer who uses his farm as a fixed input and

chickens as a variable input and the following are the results obtained in units of eggs obtained

per week:

With the information in the previous table:

TO. Fill in the table data

b. In the same diagram, draw the functions corresponding to PT, PMg and PMe.

c. Identify the stages of production, locating the technical optimum and the technical

maximum.

d. Locate and explain the equilibrium situation for the farmer.

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Chickens P.T. PMg PMe

0 0 0 0

1 150 150 150

2 400 250 200

3 600 200 200

4 760 160 190

5 910 150 182

6 900 -10 150

Illustration 6: Representations point 5.a

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Stage 1: begins when total production is zero and ends when marginal production intercepts

average production

Stage 2: The average product and the marginal product decrease, both being positive.

Stage 3: It begins where marginal production is zero or where total production is maximum,

and continues with a strong decrease in PT, PMe and negative PMg; It is totally unproductive

and there is overuse of the fixed factor and disregard of the variable factor.

The farmer's equilibrium point is with 5 hens, at this point he obtains maximum production

without making losses.

6. Of the following production functions, explain which ones have returns

increasing, decreasing or constant on scale:

to. Q= 0.5KL

b. Q=2K+3L

c. Q=10K1/2L1/2

If output increases by the same proportional change then constant returns exist.

to. Q = 0.5KL

If the product is multiplied by a quantity greater than K, there are increasing returns to scale.

b. Q = 2K+3L

And if it is multiplied by a quantity less than K, there are diminishing returns to scale.

c. Q = 10K1/2L1/2
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7. Based on the producer's study, complete the data in the following table according to the

referenced examples of production functions.

Examples of Production Input Behavior of Compatibility Correspond

production function relationship. the marginal with the law of ing graph.
functions. class. rate of diminishing
technical marginal returns.
substitution.

Cargo Fixed cost It can be a The marginal Growing Linear

transport, substituted return is Ascending
indifferent good, in this increasing. slope +
or maritime. case it can be
a good by air
or by land.

Computer Fixed cost One person is Increasing Growing Horizontal

computing needed per marginal linear slope
per worker. computer. return. equal to
zero

Manufacturi Variable It is replaced Diminishing Decreasing Linear

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ng that cost by machines marginal descending

tends to and they return slope (-)
replace carry out the
workers manufacturin
with g
machines.

BIBLIOGRAPHIC REFERENCES
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https://poli.instructure.com/courses/15820

Unit 3 / Scenario 5 Study of consumer behavior

Unit 3 / Scenario 6 Study of producer behavior

Unit 4 / Scenario 7 Short-term and long-term production costs

Scenario 8 Market forms of imperfect competition

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INDEX OF ILLUSTRATIONS

No table of figures entries found.