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Question 3: Suppose there are two people in town. Their individual demands are given by Q4 10 - 3p, Q 15 6p. (1) Sketch the individual demand curves and the aggregate town demand on the same graph, with Q on the horizontal axis and p on the vertical axis. (2) What is the quantity demanded when p = 2? When p = 3? Question 4: For each of the following price-income scenarios, sketch the co budget lines on one set of axes (i.e. put all three budget lines in one picture and label them 1, 2, and 3). Y is income, and p and p2 are the prices of goods 1 and 2, respectively. (1) Y = 70, P1 = 5, P2 = 10 (2) Y= 70, P1 = 10, P2= 10 (3) Y 140, P1 = 10, P2 = 10 For the prices and income in part (1), solve for the optimal bundle for a con- sumer with each of the following utility functions: (i) U(a,q) = mina, 5e); (ii) U(ai 92) 3 +4q2i and (i) U(ai,92) -7. In each case, how would the optimal amounts of each good change if the prices and income were to change to those given in part (2)?

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10- Po 13,33 23 aaiegate dermand 8 12.782 33 Mantet demand S 1o 5 20 25 4

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