A: JOINT  B: MARK SIDE

Consider the following demand curve:  If P = $7, what is known about the price elasticity of demand? 

Suppose that the price of Y is $40 and the price of X is $20.  Consumer income is $800.   At the optimal consumption bundle, what is the marginal rate of substitution?  Hint: use the fact that the indifference curve is tangent to the budget line at this consumption bundle.  

Suppose there are only two consumers in the market for good X. The total quantity demanded in the market at a price of $3 is _____.

Analysis/Essay/Problem-Solving:  Mike is attending a Tampa Bay Buccaneers game and during the game he consumes hot dogs and Cokes (he has to drive home, so he is being responsible). The marginal utility of the last consumed hot dog is 12 and the marginal utility of the last consumed Coke is 20. The price of a hot dog is $6 and the price of a Coke is $4. Let hot dogs be good X; and Cokes be good Y. Assume that Mike’s income is sufficient to make any marginal changes to his consumption. Based on the information given:  a. At his current level of consumption, what is Mike’s Marginal Rate of Substitution?  How did you find this number? b. Based on marginal analysis, is Mike making a utility-maximizing choice? If not, what should Mike do to increase his utility? Explain.

Analysis/Essay/Problem-Solving: The following figure shows a consumer’s indifference curves and budget lines.  a. If the consumer is currently at consumption bundle A, approximately how many units of good x is the consumer consuming at this bundle?  b. Suppose that the price of good x decreases. As such, the consumer is now able to reach bundle B.  Approximately, how many units of good x is the consumer consuming at this bundle?c. Based on the information provided in this graph, what is the Substitution Effect of this price change?   Indicate whether the consumption of x increases or decreases and by how many units. d. Based on the information provided in this graph, what is the Income Effect of this price change? Indicate whether the consumption of x increases or decreases and by how many units.

If Mike prefers a Big Mac to a Whopper and a Whopper to a pizza slice, but is indifferent between a Big Mac and a Quarter Pounder, he must

Suppose that the price of Y is $40 and the price of X is $20.  Consumer income is $800.   At the optimal consumption bundle, what is the marginal rate of substitution?  Hint: use the fact that the indifference curve is tangent to the budget line at this consumption bundle.  

According to the article “Message in a Bottleneck,” the recent movement away from globalization, free trade, and open markets is actually a good thing that will ultimately lead to greater security and prosperity for most nations.

Analysis/Essay/Problem-Solving:  Mike is attending a Tampa Bay Buccaneers game and during the game he consumes hot dogs and Cokes (he has to drive home, so he is being responsible). The marginal utility of the last consumed hot dog is 12 and the marginal utility of the last consumed Coke is 20. The price of a hot dog is $6 and the price of a Coke is $4. Let hot dogs be good X; and Cokes be good Y. Assume that Mike’s income is sufficient to make any marginal changes to his consumption. Based on the information given:  a. At his current level of consumption, what is Mike’s Marginal Rate of Substitution?  How did you find this number? b. Based on marginal analysis, is Mike making a utility-maximizing choice? If not, what should Mike do to increase his utility? Explain.