a) Choose X, and X, to max the utility fxn, '(X,X,)=chX;+Q-g}hX; st: M - R X, + P,X; a) Write down the demand functions for goods 1 and 2 b) Consider a price decrease for good 1 from R toP" . Write down the demand functions for good 1 when prices are P, and when prices drop from R toP" c) What is the compensating income, Mª associated with the price change? Obtain the SE and IE associated with the price change

a) Choose X, and X, to max the utility fxn, '(X,X,)=chX;+Q-g}hX; st: M - R X, + P,X; a) Write down the demand functions for goods 1 and 2 b) Consider a price decrease for good 1 from R toP" . Write down the demand functions for good 1 when prices are P, and when prices drop from R toP" c) What is the compensating income, Mª associated with the price change? Obtain the SE and IE associated with the price change

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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