LG3 - University of Wisconsin Department of Economics...

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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
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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.

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