Re: Problems from DSE Papers

Posted by aastha on Jun 19, 2012; 7:44pm
URL: http://discussion-forum.276.s1.nabble.com/Problems-from-DSE-Papers-tp2794993p7578276.html

@ sonakshi

q 14 : 2004   initial x=5 and y = 5/3... thus initial utility U=x.y=25/3.
                   after the removal of water subsidy , since the price of water rises to 2 and the consumer wants to achieve the same utility(hicksian) the new income should be : U=(m/2px)(m/2py) , , here px = 2 and py = 3
 therefore solving this we get m^2 = 200 ,
new income m= sq rt 200
change in income = sq rt 200 - original income (10)..which is equal to the lumpsum subsidy ...
 hence ans is d...

i hope it helped :)