MICROECONOMICS I
Practice sheet 1. Academic year 2012-2013
1 Preferences and Utility Functions
1.1. Construct an indi¤erence curve map which represents complete, re‡ex-
ive and transitive preferences in the following cases:
1. One of the two goods is a "bad".
2. The consumer gets satiated of one product but not of the other.
3. The consumer gets satiated of both products.
4. Each of the goods becomes a "bad" from some conssumption onwards.
1.2.a. Graph the following preference orders:
1. I can‘t stand butter or mermelade by themselves, but I like butter and
mermelade sandwiches.
2. x1and x2are substitutes: whenever x1, I do not mind to have half of
x2.
3. I do not mind whether it is Heineken or San Miguel, as long as it is
beer!
4. Red or blue matches, with the same ‡aiming capacities.
5. Right or left shoes of the same size, quality, design, etc.
1.2.b. For all the previous exercises, indicate whether preferences are regular
or not. In case they are not, indicate which it is the property not being
ful…lled. In case they are, indicate whether there is strict or weaj convexity
and monotonicity.
1.3. If given consumption bundles xand yit so happns that xis at least as
preferred as yand, at the same time, yis at least as preferred as x, we then
say that xand yleave the consumer indi¤erent. We denote such relationship
as xvy.
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