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Consumers Surplus A consumer has the utility function U(, y)v) where is the good in concern ail y is the money that can be spent on all other goods (so the price of y is normalized to be 1). The income of - this consumer is 100. Bi Pr X10 (In(x)y) (10%) Derive the demand function of z for this consumer. (10%) Calculate the price elasticity of the demand function in (b) Is it true that the absolute value of the elasticity of the demand decreases as the amount of x increases? (10%) Suppose price of :decreases from}to in consumers surplus Calculate the change ay (10%) Suppose price of x decreases from . Calculate the com- to X22 to pensating variation of this price change. (e) (10 . calculate the equiv %) Suppose price of T decreases from alent variation of this price change. -

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