(Solved): Unit Two Review 4. Sasha is a utility-maximizing consumer who spends all of her income on peanuts ...

Unit Two Review 4. Sasha is a utility-maximizing consumer who spends all of her income on peanuts and bananas, both of which are normal goods. a. Assume that the last unit of peanuts consumed increased Sasha's total utility from 40 utils to 48 utils and that the last unit of bananas consumed increased her total utility from 52 utils to 56 utils. i. If the price of a unit of peanuts is \( \$ 1 \) and Sasha is maximizing utility, calculate the price of a unit of bananas. ii. If the price of a unit of peanuts increases and the price of a unit of bananas remains unchanged from the price you determined in part (a)(i), how will Sasha's purchase of peanuts change? b. Assume that the cross-price elasticity of demand between peanuts and bananas is positive. A widespread disease has destroyed the banana crop. What will happen to the equilibrium price and quantity of peanuts in the short run? Explain. c. Assume that the price of bananas increases. i. Will the substitution effect increase, decrease, or have no effect on the quantity of bananas demanded? ii. What happens to Sasha's real income? a. The table below gives the quantity of good \( X \) demanded and supplied at various prices. i. Is the demand for good \( X \) relatively elastic, relatively inelastic, unit elastic, perfectly elastic, or perfectly inelastic when the price decreases from \( \$ 30 \) to \( \$ 20 \) ? Explain. ii. Is the supply of good \( X \) relatively elastic, relatively inelastic, unit elastic, perfectly elastic, or perfectly inelastic when the price decreases from \( \$ 30 \) to \( \$ 20 \) ? Explain. iii. If a per-unit tax is imposed on good \( X \), how is the burden of the tax distributed between the buyers and sellers of good X? b. Assume that the income elasticity of demand for good \( Y \) is -2 . Using a correctly labeled graph of the market for good \( Y \), show the effect of a significant increase in income on the equilibrium price of good \( Y \) in the short run.