Re: problem code : 030609MICRO

Posted by Kamal1 on Jun 03, 2009; 7:15pm
URL: http://discussion-forum.276.s1.nabble.com/problem-code-030609MICRO-tp3017449p3020440.html

No.

She will be atleast as well off as she was before because she can afford her old consumption bundle.

x1= m/2p1
x2= m/2p2

under the new scenario the budget line is 1.1px11 +p2x22 = 1.05m
The old consumption bundle satisfies it.

In general we cannot comment whether he will be better off or not coz the new bundle wasnt available in the base period if he decides to consume above the intersection point.

Only a doubt: when it is given that preferences are cobb douglas do we need the requirement of equal ependiture?