econ302 final study guide - -Ratio of Y/X independent of...

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Definitions Marginal Utility: the change in utility when X increases by 1 unit while all other variables are constant - Partial derivative of the utility function with respect to X Cobb-Douglas: U(X,Y) = X^alpha * Y^beta - Decreasing MRS everywhere - 2 goods are imperfect substitutes - Ratio of Y/X only independent of income Leontieff: U(X,Y) = min{alpha X, beta Y} - 2 goods are perfect compliments
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Unformatted text preview: -Ratio of Y/X independent of income AND price Linear Utility: U(X,Y) = alpha * X + beta * Y-Constant MRS everywhere, independent-2 goods are perfect substitutes Due to Substitution Effect: 1) Government imposes a tax 2) Change in X1 to Xb Due to Income Effect: 1) Change in Xb to X2 Due to Both: 1) Price increases 2) Price decreases 3) Change in X1 to X2...
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This note was uploaded on 09/24/2008 for the course ECON 302 taught by Professor Toossi during the Fall '08 term at University of Illinois at Urbana–Champaign.

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