ECO 304K
INTRO MICRO
Fall 2009
Hickenbottom
HOMEWORK #2
(Due September 30 at 1pm)
1. A demand curve is given by the following equation:
P = 2Q + 40
(1 point)
a)
Calculate the Total Revenue when Q = 12 and when Q = 15
b)
Calculate the price elasticity of demand between Q = 12 and Q = 15
c)
Explain why the relation between the numbers in (a) and (b) makes sense.
2.
A consumer has $240 to allocate between baseball tickets and hockey tickets.
Assume that in any graphs involving quantities of both goods, baseball tickets go
on the horizontal axis:
a)
If the price of baseball tickets is $12 each and hockey tickets are $20 each,
draw the budget constraint for the consumer.
Be sure to specifically label each
intercept.
(1 point)
b)
Explain why (10, 6) is on this budget constraint but you cannot tell anything
about the MRS at this point.
(1 point)
c)
Now you know that (5, 9) is the utility maximizing point for this budget, explain
why you can now tell that the MRS of (10, 6) is bigger or smaller than a specific
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 Fall '10
 HICKENBOTTOM
 Price Elasticity

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