Marvin has a Cobb-Douglas utility function,
Upper U equals q 1 Superscript 0.5 Baseline q 2 Superscript 0.5U=q10.5q20.5,
his income is
Yequals=$900900,
and initially he faces prices of
p 1p1equals=$22
and
p 2p2equals=$22.
If
p 1p1
increases from
$22
to
$44,
what are his compensating variation (CV), change in consumer surplus
(Upper DeltaΔCS),
and equivalent variation (EV)?
Part 2
Marvin's compensating variation (CV) is
$enter your response here.
(Enter your response rounded to two decimal places and include a minus sign if necessary.)
Part 3
Marvin's change in consumer surplus
(Upper DeltaΔCS)
is
$enter your response here.
(Enter your response rounded to two decimal places and include a minus sign if necessary.)
Part 4
Marvin's equivalent variation (EV) is
$enter your response here.
(Enter your response rounded to two decimal places and include a minus sign if necessary.)