ps4 301 f06_ProblemSet

# ps4 301 f06_ProblemSet - Econ 301 – F06 PROBLEM SET 4 due...

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Unformatted text preview: Econ 301 – F06 PROBLEM SET 4- due in class on Friday October 20 Wissink 1. For an increase in Px, using an indifference curve/budget line picture, diagrammatically show the \$compensating variation for the following utility functions: u(x, y) = xy; u(x, y) = x + y; u(x, y) = min{x, y}. Assume y=\$aog. 2. Assume a horizontal supply curve for X. Now, using the Hicksian and Marshallian demand curves, show the 101-style excess burden and the 301-style excess burden of a per unit tax on “X” assuming that the Marshallian demand curve for X is vertical. 3. Suppose that Charlie’s preferences violate the “weak axiom of revealed preference.” Using an indifference curve/budget line picture, demonstrate Charlie violating this axiom. 4. Using an indifference curve/budget line picture, demonstrate that if u=min{\$aog, X} then a per unit tax on X will create no 301-style excess burden. Demonstrate the difference between the 101-style excess burden and the 301-style excess burden using the Hicksian and Marshallian demand curves...
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ps4 301 f06_ProblemSet - Econ 301 – F06 PROBLEM SET 4 due...

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