ECON 100A Lecture Notes - Lecture 25: 32X
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U (x,y) = xy py = 1, i = 16. What is cv, ev and cs when px increase from 2 to 4. Cv = e (p, u) e (p", u) Ev = e (p, u") e (p", u") Cs = 4 to 2 integral x dpx. Step 1: compute the original marshallian demand, max xy subject to 2x+y = 16. Step 2: compute u and u", px = 2, x = 4, y = 8, u = 32, px = 4, x = 2, y = 8, u" = 16. Step 3 cv find e (p", u) (old utility new price: min 4x+y subject to xy = 32, y = 32/x, substitute into objective function 4x + 32/x, f. o. c. Y = 32 / 2 2 = 8 2: e (p", u) = 4 (2 2) + 8 2 = 16 2.
