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1. State five (5) reasons why we might expect a divergence between revealed preference and normative preferences. [5 marks] 2. Use indifference curve analysis to show whether Baaba is at equilibrium and what should be done to arrive at equilibrium if necessary. Baaba is currently consuming where the marginal utility associated with consuming bread is twice as large (in 2. X, * absolute value) as the marginal utility associated with consuming good X, even though the price of bread is only half the price of good X. 1/2 2 is marks! zam my 3. Explain the relationship between the goods described below in terms of what their indifference curve probably looks like. [4 marks each] a. Consumer A gets 10 units of utility (utils) out of buying 2 units of good X and 2 units of good Y, but receives no additional utility when buying additional units of only good X. b. Suppose we have two goods, A and B, where more is better is true for good A, but not good B. What does the indifference curve generally look like in this case? 4. If there is a 5% increase in consumer income and the income elasticity of yogurt is 2.5, then what will be the specific % change in the quantity of yogurt sold? [2 marks] 5. What are the two implications of the weak axiom of revealed preference? [2 marks]