1 Emporia State University

School of Business
Spring 2022
BC 807 OA
Homework 4 Total Points = 20

Homework 4 is due on Sunday, April 10th by 11:59 pm (Central Time). No extensions will be
granted. The class website on Canvas will stop accepting homeworks at 12:00 am on Monday,
April 11.

All homeworks must be uploaded to Canvas using the procedure described on the website (and
in the course syllabus). This is the ONLY way in which homeworks may be submitted.
Homeworks SHOULD NOT be sent by email, handed to the department secretary or
anyone else in the department office, left in my mailbox at the department office, slid under
my door or left outside my office (if you submit your homework through any of these methods,
I will not grade it and you will get a grade of zero for that homework).

The file containing your answers should be typed in Microsoft Word and the file name
MUST be “Homework4.YourName.docx” where YourName is your name (eg. JohnSmith)
(eg. Homework4.JohnSmith.docx).

You may use Google Docs to prepare your homework, but please upload the actual document
and DO NOT just send me a link to the document. You may also submit a PDF document with
your answers.

You should type all answers. Equations and graphs may be written/drawn by hand and then
scanned into your document. While you may discuss the homework with others, you should
write the answers by yourself. If two students submit identical (or largely similar answers) both
students will get zero points. Further penalties may apply.

All answers MUST be included in one file, even if you have to scan graphs or equations. It
is possible to include scanned images in Word documents, and they certainly can be included in
PDF documents. Please DO NOT submit multiple files with your answers.

Your answers must not be copied out of the textbook or from anywhere else, including the
internet. Copied assignments will be subject to sanctions, up to and including an administrative
withdrawal from the class.
1. (5 points) (a) Suppose a consumer derives satisfaction from consuming hamburgers and hot
dogs. How will the budget line change when the consumer is offered a "buy two, get one free"
deal for hot dogs (limit one free hot dog). Please show the changed budget line on the graph
given below.

(b) Please explain how “Buy one get one free” is different from a half price (50% off) sale.
2. (5 points)

What is the Marginal rate of substitution at point B. Please give an explanation and show any
calculations.
3. (10 points)

Suppose that a consumer has the indifference map shown above. The relevant budget line is
LZ. The price of good Y is $10.

(a) What is the consumer’s income? Please show your calculations.

(b) What is the price of good X? Please show your calculations.
(c) Write the equation for the budget line LZ.
(d) What point in the graph will lead to utility maximizing with the budget line LZ and the
indifference curves as shown above? Please explain.
(e) Please explain why the consumer will not choose point A or point B.