Question

Utility Surface: TU = TU,Xt TU_T Y-4 6.5 13.5 13 12 10 18.5 18 17 15 12 X 2 21.5 21.5 20.5 18.5 15.5 X 4 21 Y 2 Y 1 Y O 18 15 X 1

Answer 1

7. Income elasticity of demand refers t the sensitivity of the quantity demanded for a good to change in real income of consumers who buy the good,keeping all other goods constant.The formula for calculating the income elasticity of demand is the percent change in quantity demanded divided by the percent change in income.With income elasticity of demand,you can tell if a good is necessary or luxury.

8. The consumers objective is to choose the bundle of goods which provides the greatest level of satisfaction as they the consumer define it..........formally we say that consumers maximise their utility subject to budget constraint.Utility is defined as the satisfaction that a consumer derives from the consumption of a good.

10. The own price elasticity is often simply called price elasticity.There are to types of price elasticity.ELASTIC and INELASTIC.Price elasticity of demand is a measure that captures the responsiveness of goods quantity demanded to a change in its price.

PED = % of change in the quantity demanded

% of change in price