EBK ECON MICRO
6th Edition
ISBN: 9781337671828
Author: MCEACHERN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 17, Problem 4P
To determine
The net gain if the government fixes the price above the optimal level.
Concept Introduction:
The positive or negative consequences faced by an unrelated third party or parties due to the performance or undertaking of an economic activity are known as externalities. The cost of economic activity incurred by a third party or parties is known as negative externalities.
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The preferences of a consumer are represented by the following utility function:
U = min (×1, 2x2)
If income is 100 and p1=p2=1
a) What is the optimal bundle?
b) If p₁=4, what is the new optimal bundle?
c) If p2=4, what is the new optimal bundle?
d) Decompose the price effect into income and substitution effect and provide a graphical representation of your results.
Challenges of Nepal's foreign trade.
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