{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# REC 2 - ECO303.02 Recitation 2 1 The price elasticity of...

This preview shows pages 1–2. Sign up to view the full content.

ECO303.02 Recitation 2 1) The price elasticity of gasoline supply in the U.S. is 0.4. If the price of gasoline rises by 8%, what is the expected change in the quantity of gasoline supplied in the U.S.? A) +3.2% B) -3.2% C) +32.0% D) +0.32% Answer: A 2) Jane lives in a dormitory that offers soft drinks and chips for sale in vending machines. Her utility function is U = 3SC (where S is the number of soft drinks per week and C the number of bags of chips per week), so her marginal utility of S is 3C and her marginal utility of C is 3S. Soft drinks are priced at \$0.50 each, chips \$0.25 per bag. a. Write an expression for Jane's marginal rate of substitution between soft drinks and chips. b. Use the expression generated in part (a) to determine Jane's optimal mix of soft drinks and chips. c. If Jane has \$5.00 per week to spend on chips and soft drinks, how many of each should she purchase per week? Answer:

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 3

REC 2 - ECO303.02 Recitation 2 1 The price elasticity of...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online