The consumer's utility function is given by u(x, y) = x²x2. The consumer's income is 6, the prices are pi = 1 and p2 = 2. Then the price of good 2 changes to p2 = 1. Find the compensating and the equivalent variations. Find the consumer's surplus, defined as ACS = – S"2 x2(P1,t, m)dt.' P2

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Problem 3
The consumer's utility function is given by u(x, y) = x²x2. The consumer's income is 6,
the prices are pi
the compensating and the equivalent variations. Find the consumer's surplus, defined as
ACS =
1 and p2
2. Then the price of good 2 changes to p2
1. Find
%3|
S: x2(P1, t, m)dt.!
P2
Transcribed Image Text:Problem 3 The consumer's utility function is given by u(x, y) = x²x2. The consumer's income is 6, the prices are pi the compensating and the equivalent variations. Find the consumer's surplus, defined as ACS = 1 and p2 2. Then the price of good 2 changes to p2 1. Find %3| S: x2(P1, t, m)dt.! P2
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