Five Minute Exercises > Compensating Variation with Perfect Complements Preferences

Problem

Given:

A household always buys 2 units of Y for each unit of X
Initially, Px=3, Py=1 and the household spends $100 total
A new policy lowers Px and raises Py: Px=2 and Py=2

Determine:

The compensating variation for the policy.

Site Index | Zoom | Admin
URL: https://wilcoxen.maxwell.insightworks.com/pages/3514.html
Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 11/07/2011