Posted: December 18th, 2022

1) What is the own-price elasticity of demand for p = 100 – 5q, at q = 10; at q = 5; at q = 12?

2) What is the own-price elasticity of demand for p = a – bq? (Show the elasticity as an expression depending on the value of q.)

3) Show the budget line for p1 = 5, p2 = 10, and m = 150 in a figure. (pi = price of good i; m = income).

4) For the numbers in 3), what can you say about the purchases of goods x1 and x2 if the bundles (x1, x2) available are ,

a) (16; 7)

b) (8: 8)

c) (10; 10)

d) (14; 9)

5) For the situation in 3), show graphically what if p1

a) increases to 8;

b) decreases to 4.

c) for the increase of p1 to p1 = 8, can the consumer still afford any of the consumption bundles in 4)?

6) For p1 = 5 and p2 = 10, what happens of income increase from m = 150 to m = 180? Show the change in a figure.

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