Mohammed spends all of his income on two goods, left shoes and right shoes.
His utility function is given by: U(x₁,x₂)= min(x₁,x₂). The price of right shoes is $10 and the price of left shoes is $20. His income is $60. Suppose the price of left shoes falls to $10. Measure the change in Mohammed's well- being.
i)using compensating variation
ii)using equivalent variation

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The Answer of Mohammed spends all of his income on two goods, left shoes and right shoes. His utility function is given by: U(x₁,x₂)= min(x₁,x₂). The price of right shoes is $10 and the price of left shoes is $20. His income is $60. Suppose the price of left shoes falls to $10. Measure the change in Mohammed's well- being. i)using compensating variation ii)using equivalent variation

Mohammed Spends All of His Income on Two Goods, Left