Why an economy’s income must equal its expenditure.

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For the two questions, use the provided Lorenz curve. Income 100% Lorenz curve If the economy's income were distributed according to the Equality line, what would the Gini coefficient be? 1 0 0.5 Infinity 80 60 60 60 10 40 If the economy's income were distributed according to the A line, how much of the economy's income is earned by the third quintile of families? 60% 40% 20% 100% 20 Equality 0 20% 40 40 A 50 60 80 100 Families

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Chapter 10, Problem 1QR

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Why an economy’s income must equal its expenditure.

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For the two questions, use the provided Lorenz curve. Income 100% Lorenz curve If the economy's income were distributed according to the Equality line, what would the Gini coefficient be? 1 0 0.5 Infinity 80 60 60 60 10 40 If the economy's income were distributed according to the A line, how much of the economy's income is earned by the third quintile of families? 60% 40% 20% 100% 20 Equality 0 20% 40 40 A 50 60 80 100 Families

1. For the following utility functions, (i) calculate the MRS, (ii) show whether the MRS is constant, or diminishing, or increasing, (iii) calculate the degree of homogeneity, (iv) check the convexity of the Indifference Curve using the condition that for a function to be strict quasi-concave, it must be that f2f11-2f1f2f12+ ff22 < 0, (v) based on MRS's characteristics, draw an approximate Indifference Curve, and (vi) comment on the type of utility function. (a) U(x, y) = 3x + y (b) U(x, y)=√√x y (c) U(x, y)=√√x + y (d) U(x, y)=xy x+y

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