Ed's Utility from Vacations (V)and Meals (M)is Given by the Function

question 38

Essay

Ed's utility from vacations (V)and meals (M)is given by the function U(V,M)= V²M.Last year,the price of vacations was $200 and the price of meals was $50.This year,the price of meals rose to $75,the price of vacations remained the same.Both years,Ed had an income of $1500.
a.Calculate the change in consumer surplus from meals resulting from the change in meal prices.
b.What is the compensating variation for the price change in meals?
c.Calculate the equivalent variation for the price change in meals.

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Definitions:

Foreign

Relating to or originating from a country other than one's own, often associated with international laws, transactions, or entities.

Interstate

Relating to or involving more than one state, usually in reference to commerce or transportation that crosses state lines.

Closely Held Corporations

Corporations that have a limited number of shareholders and whose shares are not publicly traded.

Foreign Corporations

Entities incorporated under the laws of a foreign country that do business in another country.