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

Consumption function of an economy, The consumption function of an economy ...

The consumption function of an economy is given by c = 200+0.75(y-t) And the investment function by I = 200 = - 25r. Government purchases G and taxes Τ are both 100.  T

Classical model, using a graph of the classical labour market, illustrate t...

using a graph of the classical labour market, illustrate the effects of a real wage existing in the market that is lower than the equilibruim real wage.what will eventually happen

What is effective demand, Effective Demand The concept of effective dem...

Effective Demand The concept of effective demand is the logical starting point of Keynes Theory of Employment. Effective demand manifests itself in the aggregate expenditure of

Commercial transactions in blood from the egoistic, Examine the pros and co...

Examine the pros and cons of commercial transactions in blood from the egoistic, the utilitarian, and the Kantian perspectives.

Law of diminishing returns, Explain the law of diminishing marginal returns...

Explain the law of diminishing marginal returns using the example of a factory which is currently running at half capacity and employs more staff

Explain about economic growth rate, Explain about Economys growth rate ...

Explain about Economys growth rate Economy's growth rate: Long-term economic growth, or tendency growth, is the rate of growth the economy can sustain, ignoring the short-term

Market demand curve, The entire market is capture by a single firm which ca...

The entire market is capture by a single firm which can produce at a constant average and marginal cost of AC = MC = 10. The firm faces a market demand curve given by Q = 60 ? P.

Fiscal policy and budget, Fiscal policy is the program of government’s with...

Fiscal policy is the program of government’s with respect to the amount and composition of (i) expenditure: the purchase of commodities and services, and spending in the form of su

Determine the dimensions of antenna , Design a rectangular patch antenna (s...

Design a rectangular patch antenna (substrate: εr = 3, tan-δ=0, h = 0.75 mm) operating at f0 = 2.5 GHz a) Determine the dimensions W and L of the antenna, assume w/λo b) The

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