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a. What are the Laspeyre and Paasche indexes between years years 2 and 3, and between years 1 and 3?
b. Is Mr. Jones better off in year 1 or year 2? Is he better off in year 2 or year 3? Is he better off in year 1 or year 3?
6. Is is true that if two goods are substitutes, a fall in the price of one will lead to a fall in the price of the other? Does it matter whether the initial decline in price is demand-led or supply-led?
7. Suppose that upon graduation from college a person has the option of taking a job paying \( \$ 10,000 \) per year or borrowing money to go through medical school. Why would anyone become a medical doctor?
8. Suppose Miss Smith, who is 22 years old, learns that she has received an inheritance that will pay her \( \$ 100,000 \) on her 35 th birthday. Using indifference curve analysis, explain what happens to her current consumption behavior.
9. a. Jeffrey, who is five years old, likes candy and hates spinach. He is allowed two candy bars a day, but his mother offers to give him one additional candy bar for every two ounces of spinach he eats each day. On these terms, Jeffrey eats three ounces of spinach and \( 31 / 2 \) candy bars each day. Using indifferenc
