consumer theory

Question 1

how to work out marshallian demand theory

Answer 1

find x1 in the form of p1 and m. then sub in

Question 2

how to find substitution effect

Answer 2

look for budget line with new prices, and original utility level (to find m)
plug this value of m into marshallian demand function to find how many more units of good 1 would be consumed with substitution effect

Question 3

how to find income effect

Answer 3

will be the rest of the way to the full increase after income effect

Question 4

how to find compensating variation

Answer 4

make an equation using the new prices and marshallian demand function and multiply it by (m-cv) to give initial utility level.
step 3: solve

Question 5

how to find equivalent variation

Answer 5

set new prices into marshallian demand function. multiply it by (m+ev)= new utility level
solve to get ev

Question 6

how to tell if it’s a corner solution

Answer 6

if the slope of the budget line and MRS are different

Question 7

what are perfect substitutes

Answer 7

an equation taking the form ix1 +jx2

Question 8

what are perfect compliments

Answer 8

a graph taking the form min(ix1, jx2)
L shaped