Economics 101 Name ____________________Summer 2010Quiz #46/30/10 Discussion Section Day and Time ____________________Question 1: CPI/Inflation (1 Point)You have the following information about the economy for Little ItalyYear Price of Spaghetti Price of Meatball Price of Cannoli2005 $4 $1 $22006 $6 $1 $22007 $6 $2 $2The market basket of goods in Little Italy is one Italian dinner. The Italian dinner is comprised of:1 order of Spaghetti, 2 Meatballs and 1 Cannoli (This is the market basket)Using any base year you would like, calculate the inflation rate between 2006 and 2007. (Hint: the inflation rate is the same no matter what base year you use.)Question 2: Elasticity (1 point)You have the following information about Steak and Lobster.Quantity of Steak Quantity of Lobster Price of Lobster100 100 $2075 80 $251. Find the cross price elasticity of demand for steak, using the arc-elasticity formula.2. Are steak and lobster substitutes, complements or neither? (Circle your answer)a. Substitutesb. Complementsc. Neitherd. Not enough informationQuestion 3: Utility and Preferences (.5 points)You know the following information about an individual and their preferences between X and Y, and information about the market for goods X and Y.a. Write down the equation for the individual’s budget constraint. Be specific.b. Determine the optimal combination of good X and Y that the individual
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