Consider the following utility function: U=f(x,y) = 3xy + x With a budget constraint given by: 350
Question:
Consider the following utility function: U=f(x,y) = 3xy + x
With a budget constraint given by: 350 = 15x + 21y.
Knowing that the price of x increases to 12 dollars,
a) Calculate the Marshallian demands before and after the price change.
b) What is the value of the original utility before the price change?
c) What is the amount of income that allows the consumer to keep the initial basket of goods after the price change?
d) Calculating Compensated Claims
e) Is it the Hicks or Slutsky method?
f) Decompose the total effects into substitution and income effects for the two goods. And represent them graphically.
g) Calculate the equivalent and compensating variations.
Governmental and Nonprofit Accounting
ISBN: 978-0132751261
10th edition
Authors: Robert Freeman, Craig Shoulders, Gregory Allison, Robert Smi