A consumer has 4 units of x and 1 unit of y. The price of x is 3, and the price of y is 6. Suppose the consumer has a utility function: U(x,y)=x (a) Is the consumer a net buyer or a net seller of x? Is the consumer a net buyer or a net seller of y?
A consumer has 4 units of x and 1 unit of y. The price of x is 3, and the price of y is 6. Suppose the consumer has a utility function: U(x,y)=x (a) Is the consumer a net buyer or a net seller of x? Is the consumer a net buyer or a net seller of y?
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 5SQ
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![A consumer has 4 units of x and 1 unit of y. The price of x is 3, and the price of y is 6. Suppose the consumer has a utility function: U(x,y)= xy.
(a) Is the consumer a net buyer or a net seller of x? Is the consumer a net buyer or a net seller of y?
(b) Suppose the price of x raises from 3 to 5, calculate (1) the endowment income effects, and (2) the compensating variation.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3b5f6b20-2a90-4bf5-8874-1eafd41b02f1%2Fcb2062f8-bc58-45da-8d82-295b47e27e9e%2Fr1pjc2l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A consumer has 4 units of x and 1 unit of y. The price of x is 3, and the price of y is 6. Suppose the consumer has a utility function: U(x,y)= xy.
(a) Is the consumer a net buyer or a net seller of x? Is the consumer a net buyer or a net seller of y?
(b) Suppose the price of x raises from 3 to 5, calculate (1) the endowment income effects, and (2) the compensating variation.
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ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning