Think about a utility function U(x,y) =xy, the budget constraint is px*x +py*y= m. m = 8, px=1, py=4. a. What is his optimal consumption? b. What is his maximum utility level? Now px has increased to 2. c. Based on expenditure function, after the price change, how much should be compensated to maintain his original utility level?
Think about a utility function U(x,y) =xy, the budget constraint is px*x +py*y= m. m = 8, px=1, py=4. a. What is his optimal consumption? b. What is his maximum utility level? Now px has increased to 2. c. Based on expenditure function, after the price change, how much should be compensated to maintain his original utility level?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 16SQ
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1. Think about a utility function U(x,y) =xy, the budget constraint is px*x +py*y= m.
m = 8, px=1, py=4.
a. What is his optimal consumption?
b. What is his maximum utility level?
Now px has increased to 2.
c. Based on expenditure function, after the
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