Questions 1. Will's utility from vacations (91) and meals (92) is given by the function U(V, M) = 91 x 92. Last year, the price of vacations was $200 and the price of meals was $50. This year, the price of meals rose to $75, while the price of vacations remained the same. Both years, Will had an income of $1500. (a) What is the compensating variation for the price change in meals? (b) What is the equivalent variation for the price change in meals?
Questions 1. Will's utility from vacations (91) and meals (92) is given by the function U(V, M) = 91 x 92. Last year, the price of vacations was $200 and the price of meals was $50. This year, the price of meals rose to $75, while the price of vacations remained the same. Both years, Will had an income of $1500. (a) What is the compensating variation for the price change in meals? (b) What is the equivalent variation for the price change in meals?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 1SQP
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![Questions
1. Will's utility from vacations (91) and meals (92) is given by the function U(V, M) = 91 x 92. Last year,
the price of vacations was $200 and the price of meals was $50. This year, the price of meals rose to
$75, while the price of vacations remained the same. Both years, Will had an income of $1500.
(a) What is the compensating variation for the price change in meals?
(b) What is the equivalent variation for the price change in meals?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd66bee8b-025d-4351-a9c3-40afb770f09a%2Fa31580b8-d9dd-4a72-b405-6841c0921a80%2Fsd879b8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Questions
1. Will's utility from vacations (91) and meals (92) is given by the function U(V, M) = 91 x 92. Last year,
the price of vacations was $200 and the price of meals was $50. This year, the price of meals rose to
$75, while the price of vacations remained the same. Both years, Will had an income of $1500.
(a) What is the compensating variation for the price change in meals?
(b) What is the equivalent variation for the price change in meals?
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