Author Question: When your budget line is just tangent to your indifference curve, you are at your best affordable ... (Read 108 times)

Chelseaamend · **on:** Jun 29, 2018

When your budget line is just tangent to your indifference curve, you are at your best affordable point.

Indicate whether the statement is true or false

Question 2

Suppose that the price elasticity of demand for snow shovels is 1.2 . What would have to happen to the price of a snow shovel for the quantity demanded to fall from 2,000 to 1,800? Use the midpoint formula in your calculations.

What will be an ideal response?

Madisongo23 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

TRUE

Answer to Question 2

percentage change in quantity demanded = 1,800 2,000/1,900 = -200/1,900
= -10.5.
-10.5/percentage change in price = -1.2

Therefore, the price of snow shovels must rise by 8.75 percent.