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

Energy supply, What happens to the extraction path if the choke price falls...

What happens to the extraction path if the choke price falls

Production possibilities curve, Using a production possibilities curve, an ...

Using a production possibilities curve, an economy that produces an output combination less than the maximum possible is depicted by a point located. a. at the top corner of the

Law of demand , Why law of demand does not hold in pakistan

Why law of demand does not hold in pakistan

Utility level and indifference curves, Consider the utility function u(x1, ...

Consider the utility function u(x1, x2) = x1x2. (a) Graph the indifference curves for utility levels 1 and 2. (They are symmetric hyperbolas Asymptotic to both axes). (b) Graph the

Trade cycle, discus the various measures that may be taken by a firm to cou...

discus the various measures that may be taken by a firm to counteract the evil effect of a trade cycle

Keynes liquidity Preference theory stipulates that m, #questionKeynes liqui...

#questionKeynes liquidity Preference theory stipulates that money demand is negatively related to current income and positively related to interest rate..

Production function and growth, Q. Production function and Growth? From...

Q. Production function and Growth? From the simple production function Y = f(L, K), we can classify three sources of growth:  An increase in L. An increase in K.

Discuss the determinants of transaction demand, Question 1 How was the Cla...

Question 1 How was the Classical Theory of interest role criticized by Keynes? Question 2 Discuss the barter system that was used in early times in lieu of money Question

Name two strategies is most likely to lead to development, Explain which of...

Explain which of the two strategies is most likely to lead to development. Empirically, it seems rather evident that export-orientation has been more successful than import-sub

Problems of measuring productivity in actual work situations, Discuss the p...

Discuss the problems of measuring productivity in actual work situations. Also how productivity might be measured for each of the following industries? Finance and insurance (examp

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