1. Fred's weekly allowance is $120.00. He can spend all of his money on either gumbo (X1) or jambalaya (X2). Price of gumbo is $6.00 per serving and jambalaya are $5 per serving. Graph Fred's budget line for gumbo and jambalaya. On the same graph, point out how budget line would change if price of gumbo decreased from $6.00 to $4.00 per serving.
2. If price of roast beef falls from $6.50 per pound to $4.00 per pound, quantity demanded increases from 12,000 pounds to 15,000 pounds. Compute price elasticity for roast beef. Write formula for price elasticity of demand in your answer. Explain price elasticity of demand by indicating whether it. would be elastic, inelastic, or unitary.