(a) Differentiate between Slutsky and Hicks approach of decomposing price effect. Draw two different diagrams, one illustrating the Slutsky version of income and substitution effects and the other illustrating the Hicks version of income and substitution effects. (b) What do you understand by consumer and producer surplus? What is the impact of price decrease on consum er surplus? On producer surplus. Show graphically and interpret.

(a) Differentiate between Slutsky and Hicks approach of decomposing price effect. Draw two different diagrams, one illustrating the Slutsky version of income and substitution effects and the other illustrating the Hicks version of income and substitution effects. (b) What do you understand by consumer and producer surplus? What is the impact of price decrease on consum er surplus? On producer surplus. Show graphically and interpret.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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