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Microeconomics 2nd Edition by Douglas Bernheim
Edition 2ISBN: 978-0071287616Microeconomics 2nd Edition by Douglas Bernheim
Edition 2ISBN: 978-0071287616 Exercise 3
Esther consumes goods X and Y, and her utility function is U( X , Y ) = XY + Y.
a. What is Esther's MRS XY Do her preferences satisfy the declining MRS property
b. Suppose her daily income is $20, the price of X is $4 per unit, and the price of Y is $1 per unit. What is her best choice What is the (own) price elasticity of her demand for good Y starting with these prices and income At what price for good Y is Esther's expenditure on good Y largest
c. Suppose the price of good Y rises to $4 per unit. What is her new consumption bundle Decompose the change in her purchases into income and substitution effects. What is Esther's compensating variation for the price change
a. What is Esther's MRS XY Do her preferences satisfy the declining MRS property
b. Suppose her daily income is $20, the price of X is $4 per unit, and the price of Y is $1 per unit. What is her best choice What is the (own) price elasticity of her demand for good Y starting with these prices and income At what price for good Y is Esther's expenditure on good Y largest
c. Suppose the price of good Y rises to $4 per unit. What is her new consumption bundle Decompose the change in her purchases into income and substitution effects. What is Esther's compensating variation for the price change
Explanation
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a)Find Esther's marginal rate of substit...
Microeconomics 2nd Edition by Douglas Bernheim
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