Optimal Purchase and Elasticity [12 pts] Imagine your preferences for books are given by the following marginal utility curve: MUb = 18 -2B where MU. is the marginal utility of consuming a book and B is the number of books. a. [2 pts] If the price of a book is $2, how many books will you purchase? b. [4 pts] If the price of a book rises to $3, how many books will you purchase? What is your price elasticity of demand on this part of the demand curve. Is demand elastic or inelastic here? c. [4 pts] Use the preferences above to derive the inverse demand curve and then relate the slope of the inverse demand curve to the price elasticity of demand. d. [2 pts] You are a book seller determining whether to increase your price from $2 to $3. Based on what you know about elasticity what would you do? -J