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Suppose that a consumers preferences are represented by U(q1, q2) = (q1q2). The consumer has income Y = 1, 800. Initially, the prices of goods
Suppose that a consumers preferences are represented by U(q1, q2) = (q1q2). The consumer has income Y = 1, 800. Initially, the prices of goods 1 and 2 are p1 = 100 and p2 = 150. A shock to the economy increases the price of good 1 by 20%. Explain and calculate the compensating variation, equivalent variation, and change in consumer surplus associated with this price change and discuss the results
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