CHAPTER 3

NOMOR 2
a. At the given prices, quantity demanded is 750 units: Qxd = 1,200 − 3(140) − 0.1(300) =
750. Substituting the relevant information into the elasticity formula gives:
EQx,Pz = −3(PX/QX) = −3(140/750) = −0.56. Since this is less than one in absolute
value, demand is inelastic at this price. If the firm charged a lower price, total revenue
would decrease.
b. At the given prices, quantity demanded is 450 units: Qxd = 1,200 − 3(240) − 0.1(300) =
450. Substituting the relevant information into the elasticity formula gives:
EQx,Pz = −3(PX/QX) = −3(240/450) = −1.6. Since this is greater than one in absolute
value, demand is elastic at this price. If the firm increased its price, total revenue would
decrease.
c. At the given prices, quantity demanded is 750 units, as shown in part a. Substituting the
relevant information into the elasticity formula gives:
EQx,Pz = −0.1(PZ/QX) = −0.1(300/750) = −0.04. Since this number is negative, goods
X and Z are complements

NOMOR 4
a. The price of good X decreases by 6 percent. The own price elasticity of demand is
calculated as:
Ed = % Change in demand / % Change in price
If the own price elasticity of demand is -5, a 6% decrease in the price of product X will
cause the quantity demanded to change by:
-5 = % Change in demand / -6%
The quantity demanded will change by:
% Change in demand = −5 × -6% = 30 %
The quantity demanded will increase by 30%.
b. The price of good Y increases by 7 percent. The cross-price elasticity of demand is
calculated as:
EX,Y = % Change in demand for X / % Change in price of Y
If the cross-price elasticity of demand is 3, a 7% increase in the price of product Y will
cause the quantity demanded of X to change by:
3 = % Change in demand for X / 7%
% Change in demand for X = 3 × 7% = 21 %
The quantity demanded of X will increase by 21%.
c. Advertising decreases by 2 percent. The advertising elasticity of demand is calculated as:
EA = % Change in demand / % Change in advertising expenditure
If the elasticity of demand is 4, a 2% decrease in the advertising elasticity of demand will
cause the quantity demanded of X to change by:
4 = % Change in demand for X / -2%
% Change in demand for X = 4 × -2% = −8 %
The quantity demanded of X will decrease by 8%.
d. Income increases by 3 percent. The income elasticity of demand is calculated as:
EI = % Change in demand / % Change in income
 If the income elasticity of demand is -1, a 3% increase in the consumer's income will
cause the quantity demanded of X to change by:
-1 = % Change in demand / 3%
The quantity demanded will change by:
% Change in demand = −1 × 3% = −3%
The quantity demanded will decrease by 3%.

NOMOR 6
$-3,360 Numeric ResponseEdit Unavailable. -3,360 correct.
Using the change in revenue formula for two products, ΔR = [$20,000(1 − 3) +
$80,000(−1.6)] (0.02) = −$3,360. Thus, a 2 percent increase in the price of good X would
cause revenues from both goods to decrease by $3,360.

CHAPTER 4
NOMOR 2
a. Since the slope of the line through A is −2020=−120−20=−1 , and the price of X is $5,
then the price of Y is also $5.
b. The maximum quantity of good X that is affordable with the given income (M) is:
X = M / Px
The price of good X, ��=PX= $5 and the maximum affordable quantity of good X is
20 units. Substituting the values in the relationship gives:
X = M / Px  20 = m / 5
M = $100
c. Given M = $100, Px = $5
X = 100 / 5 = 20
d. An increase in income causes the shift in equilibrium from point A to point B. The
consumer becomes worse off because consumers will generally spend more if they
experience an increase in income. For instance, the price of commodities will go up
leaving the consumer with less income to spend on other items.

NOMOR 3
a. We use the following budget equation:
PxX + PyY = M
Here,
Px is the price of Good
Py is the price of Good
M is the Consumer’s Income.
We have,
Px = $10
Py = $40
 M = $600
By substituting the following we will get,
PxX + PyY = M
10X + 40Y = 600
Therefore, the equation for the consumer's budget line is 10X + 40Y = 600
b.

45 Unaffordable combination of Good X and Y

30
Budget line
15

20 40 60

The upper boundary line that is shown in the diagram is the budget line, it represents the
combination of Good X and Y Good.
While the slope of the curve in the diagram, is the Marginal Rate of Substitution. The
readiness of a consumer to substitute one good from another with the same purpose of
consumption and with equal satisfaction is defined as Marginal Rate of Substitution.
Using the following equation, we can determine the Marginal Rate of Substitution:
MRS = -Px / Py
The relevant market prices are given as,
Px = $10
Py = $40
By substituting the following we will get,
MRS = -Px / Py
MRS = 10 /40
MRS = -0,25
Therefore, the marginal rate of substitution is (-0,25).
c. Since, the price of Good X increased to $20, the new equation for the consumer's budget
line will be:
20X + 40Y = 600
Therefore, we can calculate as:
MRS = -Px / Py
MRS = 20 /40
MRS = -0,5
Hence, we can conclude that the consumers will be more willing to purchase Good Y
than Good X.

NOMOR 6
a. Given that the budget line of consumer:
$600 = $100X + $200Y
  We know that the equation of the budget line is :
PxQx + PyQy = M
Where, Px & Py denotes prices of good X & good Y.  Qx & Qy shows quantity of goods
X & Y. M denotes money income of the consumer. 
 That is, Px = $100, Py = $200 & M = $600
 So, price of good X = $100 & price of good Y = $200.
b. The maximum units of good Y that can be purchased with given income can be
calculated as income divided by price of good Y:
600 / 200 = 3 units
c. The maximum units of good X that can be purchased with $600 income is 6 units.
600 / 100 = 6 units
d. With $100 certificate of good X, one more unit of good X can be purchased even if all
$600 income is spent on good Y.
100 / 100 = 1 units
e. With income of $700 (M + $100) ,7 units of good X can be purchased if all income is
spent on good X.
= M + $100/ 100 
= 600 + 100/100 
= 700 / 100 = 7 units. 
f. Based on this consumer’s, rank bundles preferred is F, E, A, B
g. Product X is normal, because the cost incurred to buy product X is only $ 100

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