Rubinstein2005-page96 - d Assume that the price of the...

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October 21, 2005 12:18 master Sheet number 94 Page number 78 78 Lecture Six b. Explain why the two measures may give different values for some other utility functions. c. Explain why the two measures are identical if the individual has quasi- linear preferences in the second commodity and in a domain where the two commodities are consumed in positive quantities.
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Unformatted text preview: d. Assume that the price of the second commodity is Fxed and that the price vectors differ only in the price of the Frst commodity. What is the relation of the two measures to the “area below the demand function” (which is a standard third deFnition of consumer surplus)?...
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