3. Given the utility function consider a reduction in the price of good 1 (p1' = 2). It is requested: u(x, x2) = x}/3 . /3.2/3 , with p1= 4, p2 = 5, m = 24, a) The initial balance of the consumer based on the problem of maximizing utility; b) The balance after the price reduction; c) The balance after Slutsky's income compensation; d) The balance after Hicks' income compensation from minimizing expenditure; e) The income, substitution and total effects in terms of the variation in demand for good 1, for the Slutsky and Hicks compensation. Compare the results. f) Plot the Slutsky and Hicks offsets on the same graph. On a chart below, represent the Marshallian, Slutsky and Hicks demand curves corresponding to the balance found.

3. Given the utility function consider a reduction in the price of good 1 (p1' = 2). It is requested: u(x, x2) = x}/3 . /3.2/3 , with p1= 4, p2 = 5, m = 24, a) The initial balance of the consumer based on the problem of maximizing utility; b) The balance after the price reduction; c) The balance after Slutsky's income compensation; d) The balance after Hicks' income compensation from minimizing expenditure; e) The income, substitution and total effects in terms of the variation in demand for good 1, for the Slutsky and Hicks compensation. Compare the results. f) Plot the Slutsky and Hicks offsets on the same graph. On a chart below, represent the Marshallian, Slutsky and Hicks demand curves corresponding to the balance found.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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