Unformatted text preview: Ratio of Y/X independent of income AND price Linear Utility: U(X,Y) = alpha * X + beta * YConstant MRS everywhere, independent2 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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 Fall '08
 TOOSSI
 Economics, Derivative, Utility, Substitute good, imperfect substitutes Ratio

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