a) Choose X, and X2 to max the utility fxn, U(X,„X)=ah.X;+(l-a)hX, st: M = P, X , + P,X , a) Consider a price decrease for good 1 from P toP . Write down the Demand functions for good 1 when prices are P, and when prices drop from RtoP b) What is the compensating income,M° associated with the price change? C) Obtain the SE and IE associated with the price change

a) Choose X, and X2 to max the utility fxn, U(X,„X)=ah.X;+(l-a)hX, st: M = P, X , + P,X , a) Consider a price decrease for good 1 from P toP . Write down the Demand functions for good 1 when prices are P, and when prices drop from RtoP b) What is the compensating income,M° associated with the price change? C) 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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