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a. Consider the following function describing the indirect utility of a consumer: 41 V (P1, P2, P3, 1) = 01 03 02 PI P2 P2

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a. Consider the following function describing the indirect utility of a consumer: 41 V (P1, P2, P3, 1) = 01 03 02 PI P2 P2 Where I corresponds to the income and aj > a2 > a3 > 0 Assume that one of the prices is multiplied by a number "t" > 1: 1. Is it true that the maximum amount of money you are willing to pay to avoid the price change is always less than the amount of money you would have to be given in compensation to return to the level of utility before the price change? Denote U. and u, as the level of utility before and after the price change, respectively. (Hint: compare changes in absolute value). 2. Do the values of a; change the relationship between Compensating Variation (CV) and Equivalent Variation (EV)

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