Consider again the problem of determining the maximum amount one is willing to pay to obtain a
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Consider again the problem of determining the maximum amount one is willing to pay to obtain a good versus the amount willing to accept to part with a good. Consider Terry, who behaves according to the model presented in equations 4.4 and 4.7. Let the utility function be given by
wealth is given by w = 100, and p2 = 1, so that x*2 = 100. Derive the maximum willingness to pay and the minimum willingness to accept for 100 units of good 1. Which measure of value is larger? How do you answers change if instead we considered only 1 unit of good 1? Under which scenario are the measures of value more nearly the same? Why? How do these answers change if
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The maximum willingness to pay is determined according to equation 44 Or which implies that The mini...View the full answer
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