Re: DSE 2013 Paper Discussion

Posted by kangkan on May 18, 2014; 9:01am
URL: http://discussion-forum.276.s1.nabble.com/DSE-2013-Paper-Discussion-tp7584703p7590069.html

Hi..for 36..the middle class will consume the bundle only if utility of bundle>= utility of basic good
 =>w1-p-c>= v1- p =>w1-v1>c..but it is given that w1-v1<c..so midl will consume basic good...now for the rich same condition applies w2-p-c>v2-p =>w2-v2>c..but this is given..hence the rich will always consume the bundle

now for 37..the CS of the midl consumer v1-p..they can charge till its zero hence p=v1....for the rich,their consumer surplus is w2-c-p..they can charge till its zero..hence p= w2-c.. :)