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Tutorial 1 - 19.01.25

The document contains tutorial problems for a Microeconomics course, focusing on supply and demand, rent control, budget constraints, and the impact of inflation on consumer budgets. It includes specific scenarios to analyze the effects of price changes on butter demand, rental price settings in New York City, and the formulation of budget constraints under different economic conditions. Each problem requires graphical illustration or mathematical formulation to derive conclusions about market behavior and consumer choices.

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21 views5 pages

Tutorial 1 - 19.01.25

The document contains tutorial problems for a Microeconomics course, focusing on supply and demand, rent control, budget constraints, and the impact of inflation on consumer budgets. It includes specific scenarios to analyze the effects of price changes on butter demand, rental price settings in New York City, and the formulation of budget constraints under different economic conditions. Each problem requires graphical illustration or mathematical formulation to derive conclusions about market behavior and consumer choices.

Uploaded by

divyagshinde21
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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HUL212 - Microeconomics

Tutorial 1
Course Coordinator: A Banerji
Problem 1: Supply and Demand
Use supply and demand curves (graphs) to illustrate how each of the following
events would affect the price of butter and the quantity of butter bought and sold:
a) An increase in the price of margarine.
b) An increase in the price of milk.

10/05/2020 Microeconomics 2
Problem 2: Rent Control
The rent control agency of New York City has found that aggregate demand is 𝑄𝐷 = 160 − 8P. Quantity is
measured in tens of thousands of apartments. Price, the average monthly rental rate, is measured in
hundreds of dollars. The agency also noted that the increase in 𝑄 at lower 𝑃 results from more three-person
families coming into the city from Long Island and demanding apartments. The city’s board of realtors
acknowledges that this is a good demand estimate and has shown that supply is 𝑄𝑆 = 70 + 7𝑃.
a) If both the agency and the board are right about demand and supply, what is the free market price?
What is the change in city population if the agency sets a maximum average monthly rental of $300,
and all those who cannot find an apartment leave the city?
b) Suppose the agency bows to the wishes of the board and sets a rental of $900 per month on all
apartments to allow landlords a “fair” rate of return. If 50 percent of any long-run increases in
apartment offerings come from new construction, how many apartments are constructed?

9/30/2020 Microeconomics 3
Problem 3: Budget Constraint
The pre-inflation budget line for a consumer is 𝑝1 x1 + 𝑝2 x2 = 𝑚. After inflation, the price of 𝑥1 doubles, the
price of 𝑥2 becomes 8 times larger, and income becomes 4 times larger. Write down an equation for the new
budget line in terms of the original prices and income.

9/30/2020 Microeconomics 4
Problem 4: Budget Constraint | Food Stamp
Suppose a household has an income for $300, while the price of food is $1 (𝑃𝐹 = 1) and non-food is $1 (𝑃𝑁𝐹
= 1). What would be the equation of budget constraint? The government provides food stamps for worth
$200. What would be the equation of the modified budget constraint?

9/30/2020 Microeconomics 5

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