Homework
Learning Outcome
a. Describe how goals, constraints, incentives, and market rivalry affect economic decisions.
b. Analyze demand, supply, equilibrium prices, and price elasticities as a quantitative tool to forecast changes in revenues.
Using the graph below, develop 2 to 4 pages response in using the following four-question prompt:
Question A
What is the maximum amount you would pay for an asset that generates an income of $250,000 at the end of each of five years if the opportunity cost of using funds is 8 percent?
Question B
Suppose the supply function for product X is given by Qxs = -30 + 2Px - 4Pz. (LO1)
a. How much of product X is produced when Px = $600 and Pz = $60?
b. How much of product X is produced when Px = $80 and Pz = $60?
c. Suppose Pz = $60. Determine the supply function and inverse supply function for good X. Graph the inverse supply function.
Question C
Suppose the own price elasticity of demand for good X is -5, its income elasticity is -1, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 3.
Determine how much the consumption of this good will change if:
a. The price of good X decreases by 6 percent.
b. The price of good Y increases by 7 percent.
c. Advertising decreases by 2 percent.
d. Income increases by 3 percent.
Question D
a. A consumer is in equilibrium at point A in the accompanying figure. The price of good X is $5.
b. What is the price of good Y?
c. What is the consumer's income?
d. At point A, how many units of good X does the consumer purchase?
e. Suppose the budget line changes so that the consumer achieves a new equilibrium at point B. What change in the economic environment led to this new equilibrium? Is the consumer better off or worse off as a result of the price change?
Format your homework according to the give formatting requirements:
a. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
c. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.