How much moneywould lolita be willing to pay

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Reference no: EM13553508

Lolita, an intelligent and charming Holstein cow, consumes onlytwo goods, cow feed (made of ground corn and oats) and hay. Her
preferences are represented bythe utilityfunction U(x, y) = x-x2/2+y,
where x is her consumption of cow feed and y is her consumption of hay. Lolita has been instructed in the mysteries of budgets and optimization and always maximizes her utility subject to her budget constraint. Lolita has an income of $m that she is allowed to spend as she wishes on cow feed and hay. The price of hay is always $1, and the price of cow feed will be denoted by p, where 0 < p ≤ 1.
How much moneywould Lolita be willing to payto avoid having the price of cow feed rise to $1? . This amount is known as the
_________ variation.
(f) Suppose that the price of cow feed rose to $1. How much extra money would you have to pay Lolita to make her as well-off as she was at the old prices? . This amount is known as the ____________ variation

Reference no: EM13553508

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