Changes

1. Suppose the cross elasticity of demand for goods A and B is +3.8, and for goods X and Y is -2.7.  What can you conclude about the relationship of the goods A and B, and of X and Y (i.e., are they substitutes or complements)?

1. Suppose the cross elasticity of demand for goods A and B is +3.8, and for goods X and Y is -2.7.  What can you conclude about the relationship of the goods A and B, and of X and Y (i.e., are they substitutes or complements)?

2.  Suppose it costs you $500 to make your first 5 units, then $200 to make your next 5 units, and then $100 to make your next 5 units.  Costs do not decrease further for you.  What is the marginal cost for you to make another unit, after you have made 12 units?  Explain briefly.

2.  Suppose it costs you $500 to make each of your first 5 units, then $200 to make each of your next 5 units, and then $100 to make each of your next 5 units.  Costs do not decrease further for you.  What is the marginal cost for you to make another unit, after you have made 15 units?  What is your overall average cost per unit after you make your 16th unit?  Compare the two and comment on how whether they are equal, and why.

3.  Suppose your annual income increases from $20,000 to $25,000.  Suppose your demand for steak increases by 10% and your demand for fast food hamburgers decreases by 5%.  Which type of goods are steak, and which type are hamburgers?

3.  Suppose your annual income increases from $20,000 to $25,000.  Suppose your demand for steak increases by 10% and your demand for fast food hamburgers decreases by 5%.  Which type of goods are steak, and which type are hamburgers?