ECON 4010 Study Guide - Midterm Guide: Relative Risk, Risk Aversion, Marshallian Demand Function
3 Feb 2014
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Dmrs only ensures convex indifference curves and, therefore, downward sloping compensated demand. It follows from slutsky equation that if income effect is sufficiently negative (as in the case of giffen goods), ordinary (marshallian) demand can be upward sloping: true. One is a positive monotonic transformation of the other. Check that the: trure if the goods are consumed in the ratio of 1 x to 1 y and the utility function is. Mrs is identical. given by u = min{x, y}: true. Do the tax case (fig 4. 5) in reverse: false. E = pxx* + pyy*, where x* and y* is the commodity bundle that minimizes the cost of achieving a given level of utility. Clearly, if both prices double, minimum cost of retaining the same level of utility must double as well, since, at unchanged relative prices cost minimizing bundle remains the same.
