Answered: Greg has the following utility…

Greg has the following utility function: u=x0.541x0.462. He has an income of $72.00, and he faces these prices: (p1,p2)=(7.00,6.00). Suppose that the price of x1 increases by $1.00. Calculate the

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter20: Consumer Choice: Maximizing Utility And Behavioral Economics

Section20.1: Utility Theory

Problem 2ST

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Question

Greg has the following utility
function: u=x0.541x0.462. He has an
income of $72.00, and he faces
these prices: (p1,p2)=(7.00,6.00).
Suppose that the price of x1
increases by $1.00. Calculate the
compensating variation for this price
change. Give your answer to two
decimals.

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