What is the maximum amount you would pay for an asset that generates an income of $250,000 at the end of each of five years if the opportunity cost of using funds is 8%?

Question 2

Suppose the supply function for product X is given by Qxs = −30 + 2Px − 4Pz.

· How much of product X is produced when Px = $600 and Pz = $60?

· How much of product X is produced when Px = $80 and Pz = $60?

· Suppose Pz = $60. Determine the supply function and inverse supply function for good X. Graph the inverse supply function.

Question 3

Suppose the own price elasticity of demand for a good X is −5, its income elasticity is −1, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 3.

Determine how much the consumption of this good will change if:

· The price of good X decreases by 6%.

· The price of good Y increases by 7%.

· Advertising decreases by 2%.

· Income increases by 3%.

Question 4

· A consumer is in equilibrium at point A in the accompanying figure. The price of good X is $5.

· What is the price of good Y?

· What is the consumer’s income?

· At point A, how many units of good X does the consumer purchase?

· Suppose the budget line changes so that the consumer achieves a new equilibrium at point B. What change in the economic environment led to this new equilibrium? Is the consumer positively or negatively affected by the price change?