Pam is rich and at this high income level, her demand for good X is independent of income and given by X*=40.1- 5 px/py where px and py denote respectively the price of good X and the price of good Y. Assuming the price of good Y is equal to 1, find Pam's compensating variation if the price of good X rises from 2 to 4.3 dollars.
Pam is rich and at this high income level, her demand for good X is independent of income and given by X*=40.1- 5 px/py where px and py denote respectively the price of good X and the price of good Y. Assuming the price of good Y is equal to 1, find Pam's compensating variation if the price of good X rises from 2 to 4.3 dollars.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Pam is rich and at this high income level, her demand for good X is independent of income and given by
X*=40.1- 5 px/py
where px and py denote respectively the price of good X and the price of good Y.
Assuming the price of good Y is equal to 1, find Pam's compensating variation if the price of good X rises from 2 to 4.3 dollars.
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