6.1 Heidi receives utility from two goods, goats milk (M ) and strudel (S ), according to...
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6.1 Heidi receives utility from two goods, goat’s milk (M ) and strudel (S ), according to the utility function U(M, S) M S.
a. Show that increases in the price of goat’s milk will not affect the quantity of strudel Heidi buys—that is, show that S/PM 0.
b. Show also that M/PS 0
c. Use the Slutsky equation and the symmetry of net substitution effects to prove that the income effects involved with the derivatives in parts a and b are identical.
d. Prove part c explicitly using the Marshallian demand functions for M and S.
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Related Book For
Microeconomic Theory Basic Principles And Extensions
ISBN: 9780324270860
9th Edition
Authors: Walter Nicholson
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