Matthew's preferences over pizza (x) and other goods (y) are given by U(x,y) = x²y. His income is $120. Make sure to answer each of the following questions with appropriate graphs with labels. Calculate his optimal basket when P = $4 and P, = $1. Calculate his income and substitution effects of a decrease in the price of pizza to $3. What is the compensating variation of the price change for Matthew? What does the compensating variation represent? | What is the equivalent variation of the price change for Matthew? What does the equivalent variation represent? a) b) c) d)
Matthew's preferences over pizza (x) and other goods (y) are given by U(x,y) = x²y. His income is $120. Make sure to answer each of the following questions with appropriate graphs with labels. Calculate his optimal basket when P = $4 and P, = $1. Calculate his income and substitution effects of a decrease in the price of pizza to $3. What is the compensating variation of the price change for Matthew? What does the compensating variation represent? | What is the equivalent variation of the price change for Matthew? What does the equivalent variation represent? a) b) c) d)
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 9SQ
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Transcribed Image Text:Matthew's preferences over pizza (x) and other goods (y) are given by U(x,y) = x²y. His income is
$120. Make sure to answer each of the following questions with appropriate graphs with labels.
Calculate his optimal basket when P = $4 and P, = $1.
Calculate his income and substitution effects of a decrease in the price of pizza to $3.
What is the compensating variation of the price change for Matthew? What does the
compensating variation represent? |
What is the equivalent variation of the price change for Matthew? What does the equivalent
variation represent?
a)
b)
c)
d)
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