An individual consumes two goods. Let prices and income in periods 0 and 1 be given p° = (pi, p2), yº and ' = (pi, p3), y', respectively. Assume that both prices are 20% lower in period 1 compared to period 0, but ncome did not change. Let the individual's indirect utility function be given by: v(p, y) = y/ /PiP2. Calculate he individual’s equivalent variation.

An individual consumes two goods. Let prices and income in periods 0 and 1 be given p° = (pi, p2), yº and ' = (pi, p3), y', respectively. Assume that both prices are 20% lower in period 1 compared to period 0, but ncome did not change. Let the individual's indirect utility function be given by: v(p, y) = y/ /PiP2. Calculate he individual’s equivalent variation.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.13P

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