Find the compensating variation , Macroeconomics

Assignment Help:

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.

 


Related Discussions:- Find the compensating variation

Change in demand for the product, The price will change in the market, only...

The price will change in the market, only due to the change in demand for the product. True or false

Define public good, A public good: A) Generally results in substantial n...

A public good: A) Generally results in substantial negative externalities. B) Can never be provided by a nongovernmental organization. C) Costs essentially nothing to prod

Medical goods or services, For which of the following medical goods or serv...

For which of the following medical goods or services is the income elasticity of demand largest? a. emergency services after a car accident b. measles shots c. physical ex

Kuhn tucker conditions and utility function, 1. Kuhn - Tucker Conditions ...

1. Kuhn - Tucker Conditions  Max 2x + 3y  s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 2. Max (8 + x)(8 + y)  s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 Utility function 3. U(x, y)

How rates depends on maturity, How rates depends on maturity Rates depe...

How rates depends on maturity Rates depending on maturity. Even though rates with different maturity (all recalculated to a yearly rate) need not be exactly equal, they cannot

Exchange rates, can a country have a current account deficit and a capital ...

can a country have a current account deficit and a capital account deficit at the same time?

Frequency distribution channel, The original data values cannot be determin...

The original data values cannot be determined once they are grouped into a frequency distribution channel?

What is average cost in the producing output, What is average cost in the p...

What is average cost in the producing output? Average total cost , frequently considered as to simply average cost, is sum of total cost divided through quantity of output gen

Government and price-determination, Government and Price-Determination can ...

Government and Price-Determination can be understood as follows: The government might intervene in the market and mandate the maximum price (price ceiling) or the minimum price

Explain initial actual markup, George has been selling 5,000 T-shirts per m...

George has been selling 5,000 T-shirts per month for $8.50. When he increased the price to $9.50 he sold only 4,000 T-shirts. What is the demand elasticity? If his marginal cost is

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd