University of Wisconsin Department of Economics Economics 301: Intermediate Microeconomic Theory Korinna K. Hansen Learning Guide 3 Due Date: Wednesday, Feb. 20, 2007 Reading Assignment: Varian Chapter 8 up to page 153. Problem Assignment: Problems 1 and 2 on page 157. Objectives: After completing the assignment you should be able to do the following: 1.Give a definition for the substitution and income effects. 2. Use a budget constraint and indifference curve graph, consider a price change for good 1 and show and explain exactly what the substitution and income effects are and why. Be able to present a formula for the two effects. 3. Given a specific function, price and income level, be able to calculate quantity changes after price changes and be able to separate and calculate the exact size of the substitution and income
This is the end of the preview. Sign up
access the rest of the document.
This note was uploaded on 08/08/2008 for the course ECON 301 taught by Professor Hansen during the Spring '08 term at University of Wisconsin.