Supplementary Exercises > Choice and Cost Benefit Analysis

Compensating Variation

Problems involving compensating variation and the income and substitution effects. See the web note on compensating variation for an example. All of the problems below include solutions.

Beer and Pizza A "lite" scenario but good practice. 
Cobb Douglas Utility No attempted humor: just a straightforward application of CV. 
Movies and Popcorn Perfect complements. 
Taxing Durable Goods Comprehensive policy application. 
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Peter J Wilcoxen, The Maxwell School, Syracuse University
 Revised 11/08/2004