Exercise 2 (Consumer's Surplus) Holding income and the price of good 2 xed, Benjamin's demand for good 1 can be expressed as 3500 100p ifp S 35 0 otherwise His income effect for the good is zero. 1. What are 1500 units of the good worth to him? 2. How much worse off would Benjamin be if he faced price p' = 30 per unit instead of p = 20 per unit? 3. If Benjamin were offered a take-it-orleave-it package of 800 units for a payment of $32000, would he accept? Exercise 3 (Consumer's Surplus) Suppose Alexa (from Exercise 1) were offered a take-it-orleaveit package of the following type: By paying a lump-sum fee of $1000, she would be allowed to purchase as many units of the good as she desires at an additional charge of $40 per unit.1 If she rejects the offer, she gets none of the good. 1. Does Alexa accept the offer? 2. Suppose the lump sum fee were F. What is the largest value of F at which she would be willing to accept the offer? 1Alexa's income effect is zero, therefore, the lump sum fee does not. affect her demand function