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Substitution effect - Price Theory

Economics
Tutor: None Selected Time limit: 1 Day

Refer to the veggies/meat question in the previous homework set. Assume that the price of vegetables increases to $4 per pund. Please do the following.

(Paul enjoys meat and vegetables according to the following utitly function U(M,V) = 5M^.6 * V^.4

1.) Calculate the size of the substitution effect - the change in the amount of veggies consumed if he gets compensated for the change in price to afford the same utility. How large should the compensation be?

Mar 26th, 2015

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Mar 26th, 2015

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