12. [G] To find the Income/Substitution effects, graphically we find the point on the original indifference curve that is tangent to a line having the slope of the new budget line. We call this point (x1, x2ub) Analytically, we can find this point as well. Specifically, the solution to what two equations will give us (x,ubs,x2ubsy ? Hint: It's the two equations that are equivalent to the graphical approach of finding this point. A. 1-Pewx,ubsP;newx2 subs 03; U2 (xubs xubry Pew abs xgubs) Pew U2(xub xubs) Pew U, (xubs xubr) Uz (xubs xubs) В. U(x1oris,x2ori) = U(x1ubs,xubs); C. I-P,orisxubs P;orix2ubs 0; Pnew Phew D. U(x1ew,x2 new) =U(x1ubs xsubsy. U,(xubs xubs) porig U2(xubs xubs) porig E. None of the above system of equations will correctly solve for (x1ubs, xubs).
12. [G] To find the Income/Substitution effects, graphically we find the point on the original indifference curve that is tangent to a line having the slope of the new budget line. We call this point (x1, x2ub) Analytically, we can find this point as well. Specifically, the solution to what two equations will give us (x,ubs,x2ubsy ? Hint: It's the two equations that are equivalent to the graphical approach of finding this point. A. 1-Pewx,ubsP;newx2 subs 03; U2 (xubs xubry Pew abs xgubs) Pew U2(xub xubs) Pew U, (xubs xubr) Uz (xubs xubs) В. U(x1oris,x2ori) = U(x1ubs,xubs); C. I-P,orisxubs P;orix2ubs 0; Pnew Phew D. U(x1ew,x2 new) =U(x1ubs xsubsy. U,(xubs xubs) porig U2(xubs xubs) porig E. None of the above system of equations will correctly solve for (x1ubs, xubs).
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.13P
Related questions
Question
![12. [G] To find the Income/Substitution effects, graphically we find the point on the original
indifference
curve that is tangent to a line having the slope of the new budget line. We call this point
(xub, x2ubs) Analytically, we can find this point as well. Specifically, the solution to what two
equations will give us (x1ubs x2subs) ?
Hint: It's the two equations that are equivalent to the graphical approach of finding this point.
U, (xubs xubs) Pew
U2 (xub xubsy ppew
ubs xubs)
Uz(xubs xubsy
U, (xubs xgubsy
A.
1-Pnewxubs - Pnewx2"
subs
03;
В.
U(x1oris,x2ori) = U(x1ubs xubs);
Pnew
Pnew
С.
I- P,origxsubs– P,origx,subs= 0:
Phew
Uz (x{ubs xubs)
Pnew
D.
U(x1"e",x2 mew) = U(x1ubs x ubs). U;(x}ubs x3ubs)_ Pporig
Uz (xubs xubs) Porig
E.
None of the above system of equations will correctly solve for (x1ubs](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4d3531bd-00b5-460a-b9e4-26ddda7ae32a%2F2cbffeb5-e470-4e2b-b35d-98e2fb44153c%2Fvul9kk9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:12. [G] To find the Income/Substitution effects, graphically we find the point on the original
indifference
curve that is tangent to a line having the slope of the new budget line. We call this point
(xub, x2ubs) Analytically, we can find this point as well. Specifically, the solution to what two
equations will give us (x1ubs x2subs) ?
Hint: It's the two equations that are equivalent to the graphical approach of finding this point.
U, (xubs xubs) Pew
U2 (xub xubsy ppew
ubs xubs)
Uz(xubs xubsy
U, (xubs xgubsy
A.
1-Pnewxubs - Pnewx2"
subs
03;
В.
U(x1oris,x2ori) = U(x1ubs xubs);
Pnew
Pnew
С.
I- P,origxsubs– P,origx,subs= 0:
Phew
Uz (x{ubs xubs)
Pnew
D.
U(x1"e",x2 mew) = U(x1ubs x ubs). U;(x}ubs x3ubs)_ Pporig
Uz (xubs xubs) Porig
E.
None of the above system of equations will correctly solve for (x1ubs
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