Chapter 3 Practice Questions

Note: Please use these questions to refresh your basic understanding of the material
covered from this class. We expect you to be able to solve these questions on your
own. In case of any concerns please contact the AA of your section for help. To be
best prepared for exams and quizzes, please do questions from the book.

Q1. RamB and ShyamB sell tea right next to each other. RamB sells half cup while
ShyamB sells a full cup. The tea sold is exactly the same. Draw an indifference curve
for the consumer who cares about consuming tea but does not care who they buy
from.

Q2. Draw the income expansion path (a different name of the income consumption
curve) in case RamB charges Rs 6 and ShyamB charges Rs 10. What if prices changed
to Rs 6 and Rs 13?

Q3. Draw the substitution effect and income effect in the case that the price of the
good on the x-axis rises.