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 study of the overall aspects and workings of a national economy is like as income, output, and the interrelationship between diverse economic sectors. It is the study of all as

Q. Relationship between L and P? • As long as L is smaller than LB, L may change with no change in prices. In this range, there is no relation between L andP. • When L is betw

explain and illustrate how the Lm curve is derived.

Suppose arm's demand curve is given by P = 120? Find the (value of) price elasticity of demand (point elasticity) for the demand curve when the price is $100. Is demand elastic or

Benefits of Regional Integration Most economic experts cite that regional integration permits disadvantaged countries to realize economies of scale, vie on a broader (often gl

The demand for textbooks is Q=200-P+25U-50Pbeer. Assume that the unemployment rate U is 8 and the price of beer P beer is $2. When the average price of a textbook is P=$100, the el

Which of the following would indicate the beginnings of an expansion of the economy? a. Fewer new firms are started. b. Stock market prices decline c. Consumer confidence improves

Examine the graph below. The mayor has placed a $2 tax on the sale of each taco sold within the city. How large is the decrease in producer surplus?

After some consultants point out that the Acme Toy Company has two bottlenecks in its production of xylophones and yo-yos. The first is a critical grinding machine that only has 9

Sally's Silk Screning produces specialty T-shirts that are primarily sold at special events. She is trying to decide how many to produce for an upcoming event. During the event its