Question: a. Linear demand functions, while simple, are easy to interpret and have many applications. Suppose the demand for pens is given by the function D(p)=57.005.00p.

a. Linear demand functions, while simple, are easy to interpret and have many applications. Suppose the demand for pens is given by the function D(p)=57.005.00p. Suppose pens cost $2. What is the price elasticity of demand? Give your answer to two decimals.____________

b. Supposem1 equals $90.00,m2equals $110.00, and the interest rate is6.00%.Supposethe consumer is willing to forgo all second-year consumption. How much can the consumer consume in the first period? $_______________________

c. Suppose that instead, the endowment is $720.00this period and $130.00next period. Suppose that the interest rate is still16.00%. Now the present value of the endowment is $______________________

d. Now suppose that the endowment is $550.00in the first period and $75.00in the second period. The interest rate is still16.00%. Now the present value of the endowment is $___________________

e. A consumer receives an endowment of $600.00this period and $100.00next period. Currently, the interest rate is16.00%. The present value of the endowment is $___________________

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