Re: Micro doubt.

Posted by Asd1995 on Jun 26, 2017; 3:33pm
URL: http://discussion-forum.276.s1.nabble.com/Micro-doubt-tp7606338p7606357.html

Hessian negative ho toh raha hai, you've evaluated D3 as <0 - <0, it should be <0+<0= <0. So a negative semidefinite hessian means convex preferences.

But jitni meri knowledge hai Hessian just confirms convexity of preferences, which I agree with. Overall effect can be only judged by evaluating D(D)/D(t).

I may have read the question wrong then, did it say it is given a subsidy of t on donations? If donations are "taxed" then effective price of donations in the budget equation should increase, so it should be 1+t.

Are we in agreement on this?

To me the answer is still b, I can't find anything wrong with my expression of DD/Dt