Question one : consumer choice

a. Dave has a budget of $180 a week to spend on food. He likes meat (x) which costs $10 a unit, and potatoes (y) which cost $4 a unit. Calculate and illustrate his budget constraint.

b. Following on from (a) assume that the price of potatoes increases to $5 a unit. Calculate and add this to your illustration.

c. Assume that Dave's optimal consumption bundle (OCB) contains 10 units of meat. Calculate his OCB and add this to your illustration appropriately.

d. For his weekday lunch Don only has two options: pies (x) which cost $6.25 each, and sausage rolls (y) which cost $2.5 each. He budgets $50 a week for his weekday lunches. Calculate and illustrate his budget constraint.

e. Following on from (d) Don informs us that, for him, one pie and two sausage rolls are perfect substitutes. Calculate his OCB and add this to your illustration appropriately.

f. Use the following information to calculate Diana's OCB and her resulting utility.

Question two : supply and demand

Consider the following demand and supply schedules and specify the inverse demand and supply functions:

Price Quantity Demanded Quantity Supplied

$3 5 2

$6 4 8

$9 3 14

a. Transpose this following demand function into an inverse demand function:

b. Consider the following market information and solve for equilibrium price and quantity.

c. Consider the following market information and solve for equilibrium price and quantity.

Question 3: SUPPLY & DEMAND Applications

a. Consider the following market information and solve for equilibrium price and quantity. Then illustrate this market making sure to include all intercepts.

b. Based on your answers to (a) calculate consumer and producer surplus for the market.

c. Assume that the government now applies a per unit tax of $18 to the supply side of this market. Specify the new supply function (St) and calculate the new equilibrium price and quantity. Add this to your diagram in (a).

d. Calculate the economic incidence of this tax.

e. Following on from (c) calculate the new consumer surplus, producer surplus, tax revenue, and the deadweight loss.

please provide explanation