Question 2: Suppose there are two goods, x1 and x2, with unit prices p, and p2. Consider a consumer with wealth w > 0 and utility function given by u(x1, x2) = x + x e. Suppose that price of good 1 increases from $2 to $3 per unit. Find the compensating variation and equivalent variation of this price change.
Question 2: Suppose there are two goods, x1 and x2, with unit prices p, and p2. Consider a consumer with wealth w > 0 and utility function given by u(x1, x2) = x + x e. Suppose that price of good 1 increases from $2 to $3 per unit. Find the compensating variation and equivalent variation of this price change.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 3SQP
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The value of p2 is 1/2.
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