Exam 8:Slutsky Equation-Part A

Maude thinks delphiniums and hollyhocks are perfect substitutes,one for one.If delphiniums currently cost $5 per unit and hollyhocks cost $6 per unit and if the price of delphiniums rises to $8 per unit,

Charlie's utility function is x_Ax_B.The price of apples used to be $1,the price of bananas used to be $2,and his income used to be $40.If the price of apples increased to $6 and the price of bananas stayed constant,the substitution effect on Charlie's apple consumption would reduce his consumption by

Charlie's utility function is x_Ax_B.The price of apples used to be $1 per unit and the price of bananas was $2 per unit.His income was $40 per day.If the price of apples increased to $2.25 and the price of bananas fell to $1.25,then in order to be able to just afford his old bundle,Charlie would have to have a daily income of

Carlos consumes only two goods,apples and bananas.His utility function is given by U(x,y)=min{x,2y}.He is endowed with w_a apples and w_b bananas.Unaware that prices are about to change,Carlos buys the quantities of apples and bananas that maximize his utility subject to his budget constraint.After he has made his purchases but before he has eaten them,the relative prices change.Carlos is then free to make further trades at the new relative prices if he wishes.

Ernest's income elasticity of demand for natural gas is 0.4.His price elasticity of demand for natural gas is -0.3,and he spends 10% of his income on natural gas.What is his substitution price elasticity?

What conditions ensure that the quantity of a good demanded increases as its price falls? Explain your answer,using diagrams.

If the Engel curve slopes up,then the demand curve slopes down.

Waldo consumes only apples and bananas and bananas are an inferior good for him.The price of apples increases,but there is an increase in his income that keeps him on the same indifference curve as before.(Waldo has convex preferences,and he prefers more to less of either good. )

The compensated demand function refers to the demand function of someone who is adequately paid for what he or she sells.

Charlie consumes apples and bananas.His utility function is U(X_A,X_B)=x_Ax²_B.The price of apples is $1 the price of bananas is $2,and his income is $30 per week.If the price of bananas falls to $1

Goods 1 and 2 are perfect complements and a consumer always consumes them in the ratio of 2 units of good 2 to 1 unit of good 1.If a consumer has an income of $300 and if the price of good 2 changes from $5 to $6,while the price of good 1 stays at $1,then the income effect of the price change