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The argument is correct Social Mobility and Income Inequality are simply two distinct phenomenons. Mobility is arguably the more complex one, and there are many different ways to define it. As an example, absolute mobility refers to someone earning more income in absolute terms (\$ per year), while relative mobility refers to someone earning more in ...


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Is it that the consumer would not consume anything of the nonlinear good in case of insufficient wealth? No, it is exactly the other way around. The utility function in the two goods case will have the following form: $$U(x,y)=u(x)+y$$ We assume that $u'(x)>0$ and $u''(x)<0$ or marginal utility of $x$ is decreasing in $x$. $MU_y$ meanwhile is ...


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This depends on the exact preferences, but usually the utility function $$ U(x,y) = v(x) + y $$ is such that $$ \lim_{x \to 0} |MRS(x,y)| = \lim_{x \to 0} \frac{\text{d}v(x)}{\text{d} x} = \infty. $$ In this case it is the consumption of an additional marginal unit of the nonlinear good $x$ that is infinitely useful compared to the consumption of an ...


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