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4. Applications and Extensions: Elasticity and Uncertainty (35 points) Elasticity l. (10I points) Let Marshallian demand for good at, be x1 = 40 41),. a. (2 points) Calculate the general form for price elasticity of demand given this demand function. h. (2 points) For a price p, = 4, calculate price elasticity of demand. Describe your answer with a magnitude, and justify this response. c. (2 points) For a price p, = 8, calculate price elasticity of demand. Describe your answer with a magnitude, and justify this response. d. (2 points) Calculate the total capenditure elasticity when the price is 191 = 4-. Given this anSWer, what would a decrease in price do to total expenditures? e. (2 points) Calculate the total expenditure elasticity when the price is p, = 8. Given this answer, what would a decrease in price do to total expenditures? 5m2 2. (6 points) Let Marshallian demand for good 1:, be at, = 1m: + 5312' a. (2 points) Calculate the general form for income elasticity of demand given this demand function. b. (2 points) For income m = 400 price p, = 25, and p2 = 175, calculate income elasticity of demand. Describe your answer with a magnitude, and justify this response. c. (2 points) Given your answer in b., explain the meaning of your number and the descriptive magnitude to the layperson. 3. (6 points) Let Marshallian demand for good x1 be at, = 10:11:25\" . 1 2 a. (2 points) Calculate the general form for cross-price elasticity of demand given this demand mction. b. (2 points) For income m = 4-00 price, p, = 25, and p2 = 175, calculate the cross-price elasticity of demand. Describe your answer with a magnitude, and justify this response. c. (2 points) Given your answer in b., explain the meaning of your number and the descriptive magnitude to the layperson