price of a good changes. How could you calculate how much income the consumer would have to lose at old prices to be as well off as they are at the new prices (equivalent variation)? alculate the value of the expenditure function at the new prices and original utility minus the expenditure function at he original prices and original utility alculate the value of the expenditure function at the new prices and new utility minus the expenditure function at the riginal prices and original utility alculate the value of the expenditure function at the original prices and new utility minus the expenditure function at he original prices and original utility alculate the value of the expenditure function at the original prices and original utility minus the expenditure function at
price of a good changes. How could you calculate how much income the consumer would have to lose at old prices to be as well off as they are at the new prices (equivalent variation)? alculate the value of the expenditure function at the new prices and original utility minus the expenditure function at he original prices and original utility alculate the value of the expenditure function at the new prices and new utility minus the expenditure function at the riginal prices and original utility alculate the value of the expenditure function at the original prices and new utility minus the expenditure function at he original prices and original utility alculate the value of the expenditure function at the original prices and original utility minus the expenditure function at
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.13P
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Transcribed Image Text:The price of a good changes. How could you calculate how much income the consumer would have to lose at
the old prices to be as well off as they are at the new prices (equivalent variation)?
Calculate the value of the expenditure function at the new prices and original utility minus the expenditure function at
the original prices and original utility
Calculate the value of the expenditure function at the new prices and new utility minus the expenditure function at the
original prices and original utility
Calculate the value of the expenditure function at the original prices and new utility minus the expenditure function at
the original prices and original utility
Calculate the value of the expenditure function at the original prices and original utility minus the expenditure function at
the original prices and new utility
Which of the following is NOT a good way to measure a change in consumer welfare from a price change?
Find the equivalent variation
Find the change in the value of their utility function
All of the above are good methods
Find the compensating variation
A consumer has preferences over two goods x and y. The government imposes a sales tax on good x. In most
cases, this will cause the ratio of x to y they consume to
Increase
Decrease
No change
A consumer currently consumes 10 units of a good. The government imposes a tax of $1 per unit of the good
they buy. The government will raise the most revenue on the good if
The good is elastic
It will always raise the same amount of revenue regardless of elasticity
The good is inelastic
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