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QUESTION 1 Zenovia allocates y amount of dollars to two purchases, Good A and Good B, according to the budget constraint: PA QA +

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QUESTION 1 Zenovia allocates y amount of dollars to two purchases, Good A and Good B, according to the budget constraint: PA QA + PB QB y. Her preferences are represented by the utility function: U = (QA + 2) QB Assume Y=42; PA = 6; PB = 2. In recording your answers: a. Round any numbers that need rounding to 2 decimal points. b. The goods are perfectly divisible, so fractional quantities are possible. PART A. The most units of Good A Zenovia can purchase with her income is units. The most units of Good B she can purchase is units. PART B. The bundle that maximizes Zenovia's utility subject to her budget constraint is units of Good A and units of Good B. PART C. The (own) price elasticity for Good A at the optimal bundle is _ optimal bundle is and the (own) price elasticity for Good B at the PART D. The cross price elasticity for Good B (that is, the elasticity that measures how Good B changes with respect to a % change in Good A) at the optimal bundle is PART E. The income elasticity for Good A at the optimal bundle is bundle is and the income elasticity for Good B at the optimal

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