Answered: 1/2 1/2 Frank's preferences over q₁ and… | bartleby

Microeconomic Theory

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.13P

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1/2 1/2
Frank's preferences over q₁ and q₂ are given by U (91, 92) = 91 92 and he has an income of Y = 128. The price initial prices are p₁ = 4
and p2 = 16. Suppose that the price of g₁ increases to 13. What are the compensating variation (CV) and the equivalent variation (EV) in
absolute value?
|CV = 120.56 and |EV = 48
|CV = 102.76 and |EV = 57
|CV=88.76 and |EV = 81
|CV = 19.33 and |EV = 24
|CV = 134.67 and |EV = 123
000

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