Author: Anonymous

Suppose the market supply function is . Calculate own-price elasticity of demand at market equilibrium when = 32.42.  When necessary, round your final solutions to two places after the decimal. Own-price elasticity of demand at market equilibrium when Y = 32.4 is [ans1].

If Mackenzie Enterprises can produce a total of 100 units of the two products together, use the Lagrangian Method to find the combination of X and Y that maximizes profit. DO NOT round your solution at any time. The value for X is [ans1] and the value for Y is [ans2].

Consider the indifference map and budget constraints below:   Suppose the representative consumer allocates income towards goods X and Y. Based on this consumer’s budget constraint and indifference map, what is income if the price of good Y is $5? What is the price of good X when the optimal quantity of good X is 5 units?

PART III (extra credit, 3 points total)

Using both prices and optimal bundles derived in questions 19 – 20, solve for the equation for the demand curve for Cool Lime Starbucks Refreshers (L). Assume the demand curve is linear.

Use the prompt below to answer questions 19 – 21.  Suppose your utility function is: U(L,S) = LS, where L is the number of Cool Lime Starbucks Refreshers you consume per week and S is the number of Strawberry Acai Starbucks Refreshers you consume per week. 

Optional Extra Credit Question: This question is from “Sales of hand sanitizer are skyrocketing due to the coronavirus, leading to rationing and price hikes.” What were the consequences of a firm not estimating demand correctly?

Solve for the marginal utility for one more dollar spent on DPAC performances (x) AND the marginal utility for one more dollar spent on hockey games (y), when x=6 and y=21. The value for x is [ans1] and the value for y is [ans2].

Use the prompt below to answer questions 14 – 18. Consider the annual market demand function for Blueberry Pomegranate Vitamin Water.  

The relationship between marginal revenue, total revenue, and own-price elasticity of demand can be illustrated by the equation: