Marvin has a COBD-Douglas utility function, 0.5 U=q₁ 110.59₂0 his income is Y = $700, and initially he faces prices of p₁ = $4 and p₂ = $2. If p₁ increases from $4 to $5, what are his compensating variation (CV), change in consumer surplus (ACS), and equivalent variation (EV)? Marvin's compensating variation (CV) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.) Marvin's change in consumer surplus (ACS) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.) Marvin's equivalent variation (EV) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.)
Marvin has a COBD-Douglas utility function, 0.5 U=q₁ 110.59₂0 his income is Y = $700, and initially he faces prices of p₁ = $4 and p₂ = $2. If p₁ increases from $4 to $5, what are his compensating variation (CV), change in consumer surplus (ACS), and equivalent variation (EV)? Marvin's compensating variation (CV) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.) Marvin's change in consumer surplus (ACS) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.) Marvin's equivalent variation (EV) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.)
Chapter6: Demand Relationships Among Goods
Section: Chapter Questions
Problem 6.9P
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C.16.
Transcribed Image Text:Marvin has a Cobb-Douglas utility function,
0.5 0.5
U= 9₁ 92
1
his income is Y = $700, and initially he faces prices of p₁ = $4 and p₂ = $2. If p₁ increases from $4 to $5, what are his compensating variation (CV), change in consumer surplus (ACS), and
equivalent variation (EV)?
Marvin's compensating variation (CV) is $
(Enter your response rounded to two decimal places and include a minus sign if necessary.)
Marvin's change in consumer surplus (ACS) is $ (Enter your response rounded to two decimal places and include a minus sign if necessary.)
Marvin's equivalent variation (EV) is $
(Enter your response rounded to two decimal places and include a minus sign if necessary.)
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