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Slutsky Theorem - Mathematical Presentation:
We already know from the first order conditions of utility Maximisation that,
where Dij is the co-factor of the ith row and jth column of the determinant |D|. For income effect we know dp1=dp2=0, therefore we have from equation (h),
Now for own price effect we have dM=dp2=0. So from equation (h) we get,
Lastly, to find out own substitution effect we consider utility is constant in terms of income so, -dM+x1dp1+x2dp2=0 and dp2=0. We have from equation
Discuss whether inflation or deflation is the more serious problem for an economy. Inflation is a consistent general enhance in the price level, whereas deflation is a consiste
A Competitive Short Run Supply Curve of Firm * Observations: - P = MR - MR = MC - P = MC * Supply is amount of output for every possible price. Thus: - If
introduction of this model
Socio Economic conditions of country also affect the sales forecasting. They may include total national income per capita income standard of living of the masses, education, inflat
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What is Cost Push Inflation Cost Push Inflation : When a cost of production (e.g. wages) enhances and firms put up prices to maintain profits. Cost increases may occur beca
1
Chapter 13 / PERFECT COMPETITION and THE SUPPLY CURVE 1. Joe Brown’s dairy operates in a perfectly competitive marketplace. Joe’s machinery costs $500 per day and is the only fixe
China had to convert its yuan into dollars. Does that cause the dollar to appreciate or depreciate?
AskPharmaceutical companies can expect to earn large profits from blockbuster drugs (for high blood pressure, depression, ulcers, allergies, sexual dysfunction) while under patent
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