Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 4, Problem 4.7P
a)
To determine
The graph a graph that shows an income grant to a person provides more utility than a subsidy on good x.
b)
To determine
The extra
By using the Cobb−Douglas expenditure function.
c)
To determine
The degree to which good x should be subsidized to increase a person’s utility from U = 2 to U = 3 and the subsidy cost for the government along with the cost comparison with the cost calculated in part b.
d)
To determine
The solutions of parts (b) and (c) by re-solving for the case a = 0.3.
e)
To determine
Whether the calculations in the problem have changed when the expenditure function for the case of the fixed proportion from equation 4.54 is used instead.
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Chapter 4 Solutions
Microeconomic Theory
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