1. Suppose a consumer has a utility function U(x1,x2) = x1x2. The con- sumer has an income of $24. Initially, pi-1 and P2 2. The price of good 2 rises to $3, while the price of good 1 stays the same. The consumer's demand function is given by Di (P1,P2, m) = 2 for good 1 and D2(pi, P2, m) = 2 for good 2. Find the following: P2 a) How many units of good 1 and good 2 are demanded by the consumer before the price change? b) Find the consumer's m' at which her old bundle is affordable. c) Find the consumer's substitution effect for good 2. d) Find the consumer's income effect for good 2. Hint: For parts c and d, you can ignore good 1 and do it the way we did in class.

Magic realm, inc., has developed a new fantasy board game. the company sold 15,000 games last year at a selling price of $20 per game. fixed expenses associated with the game total $182,000 per year, and variable expenses are $6 per game. production of the game is entrusted to a printing contractor. variable expenses consist mostly of payments to this contractor.required: 1-a. prepare a contribution format income statement for the game last year.1-b. compute the degree of operating leverage.2. management is confident that the company can sell 58,880 games next year (an increase of 12,880 games, or 28%, over last year). given this assumption: a. what is the expected percentage increase in net operating income for next year? b. what is the expected amount of net operating income for next year? (do not prepare an income statement; use the degree of operating leverage to compute your answer.)