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Job is a smoker. He has a utility function for cigarettes smoked in bars (q1) and a composite good (q2) given by U(q1,q2) = 10q1-5+
Job is a smoker. He has a utility function for cigarettes smoked in bars (q1) and a composite good (q2) given by U(q1,q2) = 10q1-5+ q2 Job's income is $100 and faces prices p1 = 5 and p2 = 1. The government is planning to ban smoking in bars. Compute the compensating variation. Problem 3 Ted's uncompensated demand function for bacon is given by Q = 15/p. What is Ted's change in consumer surplus when the price of bacon rises from p = 3 to p = 5? Problem 4 A consumer has the quasi-linear utility function U(q1,q2) = 64q1 1/2 + 92 Assume p2 = 1 and Y = 100. Find the consumer's compensating and equivalent variations for an increase in p1 from 1 to 2
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