Lecturenotes5ECON2310F12

# The budget constraint is as follows if y is a

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Unformatted text preview: r consumer welfare in terms of money. Intermediate Microeconomics ECON*2310/Annen 13 Consumer Surplus (cont.) •  Graph •  Q?: Why are the CV and the EV measures diﬀerent? Intermediate Microeconomics ECON*2310/Annen 14 Exercise 1 Consider a consumer with preferences u = x + y , ( y = 1, MU x = 1 / x ) 2 MU where the good y is a composite good. She has an income of \$10 and the good x costs p x = 0.5 1.  Derive the demand funcGon for good x. 2.  Calculate the CV and EV when the price of good x reduces to p x = 0. 2 ....
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