1) You can use any of the solutions from that problem if you think they might...
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1) You can use any of the solutions from that problem if you think they might be helpful. Imagine a consumer - let's say Jenny - with monthly budget I = $300 who is only interested in goods x and y, and whose utility function is U(x, y)=√x + √y. Suppose that initially (in January) prices are P, = $20 and Py = $30. But the following month (in February) the price of good x goes up to $30 (same as Py) a. Find the quantities that Jenny will purchase in each month. If it is discovered that the reason for the increase in the price of good x was illegal collusion by the producers in that market, Jenny might be entitled to compensation. Discuss the different ways this amount might be computed (hint: they are listed below). For the first 3, you should also calculate the numerical value. For the 3rd, you can just explain how this would be done. b. Naïve method (could be more than one version - pick which seems best) c. Compensating variation d. Equivalent variation e. Consumer surplus 2) Redo problem 1, this time for utility function U (x, y) = 6√x + y (also from PS 6) *You can use a higher budget of 1,200 instead of 300 if you want to keep things simpler. At the lower budget of 300, you will get a corner solution at initial prices. You can submit either one. This time you don't need to write out the interpretation for each measure (but make sure you understand it). You can also skip explaining how to calculate consumer surplus. So you need to find: a. The quantities purchased in each of the two months. b. Naïve version of the effect on Jenny's economic wellbeing. c. Compensating variation d. Equivalent variation 3) Redo problem 2, this time for U(x, y) = 6 √x + y 4) Redo problem 2, this time for U (x, y) = 2√/min(x, 3y) 1) You can use any of the solutions from that problem if you think they might be helpful. Imagine a consumer - let's say Jenny - with monthly budget I = $300 who is only interested in goods x and y, and whose utility function is U(x, y)=√x + √y. Suppose that initially (in January) prices are P, = $20 and Py = $30. But the following month (in February) the price of good x goes up to $30 (same as Py) a. Find the quantities that Jenny will purchase in each month. If it is discovered that the reason for the increase in the price of good x was illegal collusion by the producers in that market, Jenny might be entitled to compensation. Discuss the different ways this amount might be computed (hint: they are listed below). For the first 3, you should also calculate the numerical value. For the 3rd, you can just explain how this would be done. b. Naïve method (could be more than one version - pick which seems best) c. Compensating variation d. Equivalent variation e. Consumer surplus 2) Redo problem 1, this time for utility function U (x, y) = 6√x + y (also from PS 6) *You can use a higher budget of 1,200 instead of 300 if you want to keep things simpler. At the lower budget of 300, you will get a corner solution at initial prices. You can submit either one. This time you don't need to write out the interpretation for each measure (but make sure you understand it). You can also skip explaining how to calculate consumer surplus. So you need to find: a. The quantities purchased in each of the two months. b. Naïve version of the effect on Jenny's economic wellbeing. c. Compensating variation d. Equivalent variation 3) Redo problem 2, this time for U(x, y) = 6 √x + y 4) Redo problem 2, this time for U (x, y) = 2√/min(x, 3y)
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lets solve the problems step by step Utility function Ux y x y Initial prices Px 20 Py 30 January Price in February Px 30 Py 30 a Quantities purchased in each month In January Total budget B 300 Utili... View the full answer
Related Book For
University Physics with Modern Physics
ISBN: 978-0133977981
14th edition
Authors: Hugh D. Young, Roger A. Freedman
Posted Date:
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