1.a.) Suppose there is a technological change that allows manufacturers to make Android smartphones much more cheaply. In fact, the retail price falls by 15%,ceteris paribus.

i) If the price elasticity of demand is -0.7, how much does the quantity demanded change?

ii) Are the producers definitely better off or worse off?

b.) In an alternative scenario,ceteris paribus, suppose there is a newtaxon data usage. The cum-tax monthly bill increases by 25%.

i) If the price elasticity of demand is -0.33, how much does the quantity demanded change?

ii) Do the data plan providers earn more revenue or less revenue?

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2.Miley Cyrus, under the conditions of a court order, is required to enroll Summer session at Kardashian College.She is granted $50 a week to spend:either on energy drinks at $2.25 each or on gasoline for her Bentley at $3.00 per gallon.

a.) Draw Miley's opportunity set. Label her feasible set. (Put gasoline on horizontal axis.)

(Suggestion:Draw asufficiently large diagramas you willadd more itemsto the same graph in subsequent parts.)

b.) In part a), what is the trade-off (opportunity cost) of energy drinks in terms of gasoline?

c.) In the graph for part a) above, now draw each new budget constraint she would face if:

1. The price of energy drinks fell to $2,ceteris paribus;
2. The price of gasoline rose to $3.50 per gallon,ceteris paribus;

d) Ineachcase of part c), how does the trade-off (opportunity cost) of energy drinks in terms of gasoline change.