10. Assume that a consumer's income is high enough so that with quasilinear preferences, her demand 134 curve for good 1 is given by the equation MU¡ (x1) = P1. Using the Slutsky equation (Chapter 4 appendix), show that the total effect of a change in p1 on her desired consumption of good 1 is equal to the substitution effect.

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Chapter21: The Theory Of Consumer Choice
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10. Assume that a consumer's income is high enough so that with quasilinear preferences, her demand
134
curve for good 1 is given by the equation MU¡ (x1) = P1. Using the Slutsky equation (Chapter 4
appendix), show that the total effect of a change in p1 on her desired consumption of good 1 is
equal to the substitution effect.
Transcribed Image Text:10. Assume that a consumer's income is high enough so that with quasilinear preferences, her demand 134 curve for good 1 is given by the equation MU¡ (x1) = P1. Using the Slutsky equation (Chapter 4 appendix), show that the total effect of a change in p1 on her desired consumption of good 1 is equal to the substitution effect.
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