Adjustment relative to his utility before the price change

Assignment Help Business Economics

Reference no: EM131004519

Consider a numerical example. Originally, prices were p1 = p2 = 1 and income was 10. In the next year the price of good 1 doubled. The price of good 2 stayed the same. Calculate the CPI income adjustment. Calculate the new optimal bundle. And lastly, calculate the amount of the substitution bias. By how much is the consumer better off as a result of CPI adjustment relative to his utility before the price change?

Reference no: EM131004519

Questions Cloud

Election everything would have been different : Comment on the following statement: “If John McCain had won the 2008 election everything would have been different.” What would have been different? Would that be a good or bad thing? Would anything be the same? What if Mitt Romney had won the 2012 e..

Risk-neutral investor : Suppose that a risk-neutral investor has a choice between buying a one-year bond paying 4 percent today, a two-year bond paying 5 percent today, a three-year bond paying 5.3 percent today, or a four-year bond paying 5.5 percent today, if a one-year b..

Wave of low-cost carriers : In early 1990s with a second wave of low-cost carriers (LCCs), which led to the second period of strong traffic growth from early 1993 through early 2000, Southwest Airlines arguably provided the blueprint for U.S. Between 2006 and 2009 a fuel crisis..

Is the law of diminishing returns impacted : Is the law of diminishing returns impacted as a result of firms not hiring the best workers that may be available for positions within the firm or organization? Explain your answer.

Adjustment relative to his utility before the price change : Consider a numerical example. Originally, prices were p1 = p2 = 1 and income was 10. In the next year the price of good 1 doubled. The price of good 2 stayed the same. Calculate the CPI income adjustment. Calculate the new optimal bundle. And lastly,..

Calculate utility a problem for utilitarianism : In what ways is the need to calculate utility a problem for utilitarianism? Explain the ironic dimension of whistle-blowing with respect to employee loyalty. Describe the pros and cons of legal protection for whistle-blowing. What is a trade secret, ..

Completely eliminate deadweight loss in this market : Suppose that the firm Traveldrex gets a patent for a new type of travel mug that will never tip over. As a monopolist in the market for this new type of travel mug, Traveldrex faces market demand Q = 120 – 2p, where Q is in thousands of mugs and p is..

Describe the current monetary and fiscal policies : Describe the current monetary and fiscal policies in the United States. how these policies affect exxon mobil. Predict how possible changes in monetary and/or fiscal policy may impact the supply and demand of exxon mobil. Assess how the current monet..

Consumer surplus-deadweight-demographic price discrimination : Drexoogle has developed the first computer (the “earpod”) that fits in one’s ear and functions as a phone, can tell you the time, and will conduct Google searches all in response to a person’s voice commands. What is the consumer surplus and deadweig..

User Account

All Pages