Question

1. Suppose that when the price of a good is s15, the quantity demanded is 4o units, and when the price falls to s6, the quantity increases to 6o units. The price elasticity of demand near a price of s6 and a quantity of 60 can be calculated as: A) -5/6 C)-2/9 B)-2 D) -9/2 2. Which of the following statements is true? A) The price elasticity of demand is positive when there is an inverse relationship betweern price and quantity demanded. B) A positive income elasticity indicates that demand for a good rises as consumer income falls. C) A positive cross-price elasticity for two goods A and B would arise if demand complements. D) A negative cross-price elasticity for two goods A and B would arise if A and B were demand complements A and B were 3. Assume your utility function for hamburgers and soda is U(H, S) - min[H, aS). The price of a hamburger is s8 and the price of soda is s2. Your income is si8o. Which is the possible bundle you will consume? A)H-20, S 10 C) H-15, S 40 B) H-10, S 20 D) H-15, S-3 4 Suppose that a consumer has utility function U(x, y) with MUx 5y'x and MUy axy. What is the marginal rate of substitution of X for Y? B) 5y/2x C) 2x/5y

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