Economic Elasticity Problem
I. What is the own-price elasticity of demand for p = 100 - 5q, at q = 10; at q = 5; at q = 12?
II. What is the own-price elasticity of demand for p = a - bq? (Show the elasticity as an expression depending on the value of q.)
III. Show the budget line for p1 = 5, p2 = 10, and m = 150 in a figure. (pi = price of good i; m = income).
IV. For the numbers in 3), what can you say about the purchases of goods x1 and x2 if the bundles (x1, x2) available are ,
i. (16; 7)
ii. (8: 8)
iii. (10; 10)
iv. (14; 9)
V. For the situation in 3), show graphically what if p1
i. increases to 8;
ii. decreases to 4.
iii. for the increase of p1 to p1 = 8, can the consumer still afford any of the consumption bundles in 4)?
VI. For p1 = 5 and p2 = 10, what happens of income increase from m = 150 to m = 180? Show the change in a figure.
The response must include a reference list. Using one-inch margins, double-space, Times New Roman 12 pnt font and APA style of writing and citations.