Question: 3. Assume that a typical consumer's utility function is U(qq)-qr+q2, and this consumer's income is 1-100. The prices for these two goods are p

3. Assume that a typical consumer's utility function is U(qq)-qr+q2, and this consumer's income is 1-100. The prices for these two goods are p and pz, and P P2. a. Derive the demands for these two goods. (4 points) b. Assume that there are m-20 identical consumers and p2-80. The supply of good 1 is Q-10+p. Find the equilibrium of the good 1 market? (6 points) c. What are the price elasticity of demand and price elasticity of supply? (4 points) d. Assume government implements per unit tax of t=10 on this commodity, find the new equilibrium. (5 points) e. What are the consumer surplus and producer surplus and deadweight loss? (6 points)

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a To derive the demands for these two goods we need to maximize the consumers utility subject to the budget constraint The utility function is Uq q qq q and the consumers ... View full answer

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