New answers tagged

1

Given $x_{m}$ in Slutsky form $$ \frac{\partial x_{m}(p_{x},p_{y},I)}{\partial p_{x}} = \frac{\partial x_{m}}{\partial p_{x}} \rfloor_{U=constant} - x_{c} \frac{\partial x_{m}}{\partial p_{x}} \\ = \text{substitution effect} + \text{income effect} $$ From Nicholson and Snyder (Microeconomic Theory 12th Ed.) (p. 158) "The sign of the income effect $-x_{c}...


2

When solving this problem, it is important to notice that whenever you have a tax, there will be a difference between the price that the buyers pay and the price that the sellers will receive. Let $p_D$ be the price that the buyers pay and let $p_S$ be the price that the sellers receive. The price $p_D$ is the one that is relevant for the buyers, so it ...


2

Let $p$ be price vector, let $m$ be income and let $u$ be utility. Let $e(p,u)$ be the expenditure function which gives the minimal expenditure necessary to get utility level $u$ and let $v(p,m)$ be the indirect utility function, which gives the maximal utility that can be obtained ad prices $p$ given income $m$. The Hicksian demand for good $i$, $h_i(p,u)$ ...


Top 50 recent answers are included