Find the compensating variation , Macroeconomics

Joe has preferences over pizza (p) and beer (b) given by U = pb. The marginal utilities are MUp = b and MUb = p, and Joe's income is I = 60.

1. Find Joe's optimal consumption bundle when pp = 3 and pb = 3.

2. Find the income and substitution effects (on both goods) of an increase in the price of pizza to pp = 6.

3. Find the compensating variation of the price increase.

 

Posted Date: 3/1/2013 6:47:18 AM | Location : United States







Related Discussions:- Find the compensating variation , Assignment Help, Ask Question on Find the compensating variation , Get Answer, Expert's Help, Find the compensating variation Discussions

Write discussion on Find the compensating variation
Your posts are moderated
Related Questions
The mundelfleming model takes the world interst rate r* as anexogenous variable.Let,consider what happen when this variable changes.a,what maight cause the world interest rate tori

Evaluate the mercantilist economists. Determine which economist you feel made the most significant contribution to economic theory. Provide at least two (2) reasons to support your

Q. Explain about Price Inflation? The major reason for allowing for non-constant wages in the model is that we then can allow for persistent deflation/inflation. With constant

Review the Federal Reserve Board website. Identify at least five key pieces of data (links) you would use in microeconomic decision making on the Web site, and tell what data that

If the marginal disutility of labor increases, the equilibrium real wage increases and the equilibrium quantity of labor goes up. True or false?

Q. Aggregate demand in the IS-LM model? Aggregate demand Aggregate demand depends on Y and R in the IS-LM model As investments depend on R

what role does interst rate play in refernce to output?

The Stop decay company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decay fighter, redu

Explain the elasticity concept as it applies to necessities and luxuries. Calculate the price elasticity of demand when P= 160 - Q= 480: and when P=240 - Q=320. Calculate and inter

MONEY AND CREDIT  In any modern economy, the quantity of money, aggregate volume of credit and its sectoral composition are important variables which exert significant influenc