Published 2 years ago
- We take away enough to make just affordable.
- Since P changed, we can get to a higher utility for .
is , is
- Figure cost with the new conditions. Adjust to get comp . Than may utility for this .Net b-base year & + equal some other year. How did consumption change from year b to year a If we use price at time b, we get the Laspeyres index. If we use price at time, we get the Paasche index.
- If its Consumer is better at time
- If its Just means unaffordable
- If its the consumer is better off at time .
- If we use of time we get the Paasche index
- If we use of time b, we get the Laspeyres index
- To compare the change in welfare, we have to set an index of change in total expenditure.
- If , consumer is better off at time . If , the consumer is better off at time .
- Income Effect Total Effect- ( Because you can't substitute )
- Substitution Effect Total Effect- (Because you will always substitute
- Sub Effect Total Effect- (Because good is income independent).