solution%2014%2c15%2c16%2c

# solution%2014%2c15%2c16%2c - Ch14 1, according to the...

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Ch14 1, according to the function of calculating 1 0 1 0 1 ( )( ) 2 CS q q p p = - - , measuring two points(0,100)and (15,85), we can get that the net consumer’s surplus is 112.50 a) 2, according to the definition of compensating variation, we need to give Bernice money in order to maintain her utility unchanged after price change. Bernice’s original utility derive from the 1 3* 17 ( , ) min{ , } x y U x y x y + = = => max 17 4 U = . So under the new price, in order to keep the utility unchanged, the following equation must be satisfied: 1 7* 17 17 ( , ) min{ , } 4 x y m U x y x y + = + = = =>m=17 b) 3, according to the definition of equivalent variation, we need to take money away from Bernice in order to keep her original utility the same to that after price change! Bernice’s utility after price change derives from 1 3 13 ( , ) min{ , } x y U x y x y + = = => max 13 4 U = In order to keep her original utility the same to it, the following equation must be satisfied: 1 2* 13 13 ( , ) min{ , }

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## This note was uploaded on 08/25/2009 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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solution%2014%2c15%2c16%2c - Ch14 1, according to the...

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