Find bernadette equivalent variation

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1. Suppose Bernadette has a utility function resulting in an MRS = Y / X (from U = √XY) and she has an income of $80 (i.e. M = 80). Suppose she faces the following prices, PX = 6 and PY = 5. If the price of good Y goes up to PY = 6, while everything else remains the same, find Bernadette's equivalent variation (EV).

Ans: EV = - 6.97

2. Suppose Amy Farah Fowler has a utility function resulting in an MRS = Y / X (from U = √XY) and she has an income of $60 (i.e. M = 60).

Suppose she faces the following prices, PX = 3 and PY = 2. If the price of good Y goes up to PY = 3, while everything else remains the same, find Amy's equivalent variation (EV).

Ans: EV = - 11.01

Reference no: EM133081818

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