**CLO #1 – Describe how goals, constraints, incentives, and market rivalry affect economic decisions.**

**CLO #2 – Analyze demand, supply, equilibrium prices, and price elasticities as a quantitative tool to forecast changes in revenues.**

**Using the graph below, develop a 2- to 4-page response in APA format using the following four-question prompt: **

**Question 1**

**What is the maximum amount you would pay for an asset that generates an income of $250,000 at the end of each of five years if the opportunity cost of using funds is 8 percent?**

**Question 2**

**Suppose the supply function for product X is given by Qxs = −30 + 2Px − 4Pz. (LO1)**

**How much of product X is produced when Px = $600 and Pz = $60?****How much of product X is produced when Px = $80 and Pz = $60?****Suppose Pz = $60. Determine the supply function and inverse supply function for good X. Graph the inverse supply function.**

**Question 3**

**Suppose the own price elasticity of demand for good X is −5, its income elasticity is −1, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is 3. **

**Determine how much the consumption of this good will change if: **

**The price of good X decreases by 6 percent.****The price of good Y increases by 7 percent.****Advertising decreases by 2 percent.****Income increases by 3 percent.**

**Question 4 **

**A consumer is in equilibrium at point A in the accompanying figure. The price of good X is $5.****What is the price of good Y?****What is the consumer’s income?****At point A, how many units of good X does the consumer purchase?****Suppose the budget line changes so that the consumer achieves a new equilibrium at point B. What change in the economic environment led to this new equilibrium? Is the consumer better off or worse off as a result of the price change?**