in class, we looked at the CV and EV associated with changes in prices. The same measures can be used if wealth also changes; thus, for instance, if prices and wealth change from pº, wº) to (p¹, w¹), then the CV is e(p¹, v(p¹,w¹)) -e(p¹, v(pº, wº)). Consider the expenditure function e(p, u) = U P₁ + P₂ Let initial prices and wealth be pº = (1, 1) and wº = 1 respectively. (a) Find the indirect money-metric utility function e(p, v(p, w)). (b) Evaluate the EV and CV if p¹ = pº (i.e. prices remain the same) and wealth changes from wo to w¹ = 2. (c) Evaluate the EV and CV if prices change from pº to p² = (2, 1) and wealth changes from wo to w²2.5.

in class, we looked at the CV and EV associated with changes in prices. The same measures can be used if wealth also changes; thus, for instance, if prices and wealth change from pº, wº) to (p¹, w¹), then the CV is e(p¹, v(p¹,w¹)) -e(p¹, v(pº, wº)). Consider the expenditure function e(p, u) = U P₁ + P₂ Let initial prices and wealth be pº = (1, 1) and wº = 1 respectively. (a) Find the indirect money-metric utility function e(p, v(p, w)). (b) Evaluate the EV and CV if p¹ = pº (i.e. prices remain the same) and wealth changes from wo to w¹ = 2. (c) Evaluate the EV and CV if prices change from pº to p² = (2, 1) and wealth changes from wo to w²2.5.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Why must economic theories and models be abstract?
ASAP Schools of Economic Theory
Give one example of metaphor that we can use for micro and microeconomics.
Do marketers create needs?
List of all economic theories
Explain & give examples of the relationship between reality and discourse.
Assess the importance of Elinor Ostrom’s work for economists?
What are the other forms of basic economic studies? Define each.