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A project changes the market prices of two goods X1 and X2; with demand functions: (if = 26 - 2391 + 3102 q; = 86
A project changes the market prices of two goods X1 and X2; with demand functions: (if = 26 - 2391 + 3102 q; = 86 + 3131 2.5132 where p1 and p2 are the own-prices in dollars of X1 and X2; respectively. The project changes p1 from $4.00 to $2.75, and p2 from $1.00 to $1.75. All price changes are in year 0, and last for this year only (meaning that we are not worried about the time value of money). The cross-price derivatives are: d\" (1* i=3, 2:3 dpz dpl 2a. (4 pts) If you were to calculate the willingness-to-pay for this project, is there a path dependency concern for this scenario? Explain why or why not. 2b. (12 pts) Compute the willingness-to-pay for this project using the integral technique. Start by assuming that good X1 experiences a price change first. Thus, we hold the price for X2 constant at its initial price, $1.00. Next, assume that good X2 experiences a price change after good x1. Thus, we hold the price for X1 constant at its final price, $2.75
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