The Maxwell School

Syracuse University

Syracuse University

The Maxwell School

Syracuse University

Syracuse University

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.

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URL: https://wilcoxen.maxwell.insightworks.com/pages/3514.html

Peter J Wilcoxen, The Maxwell School, Syracuse University

Revised 11/07/2011

URL: https://wilcoxen.maxwell.insightworks.com/pages/3514.html

Peter J Wilcoxen, The Maxwell School, Syracuse University

Revised 11/07/2011