Question

8.8 Unanswered Right now you pay for university (e) and the composite good (c) and your utility level at your current choice isUnitial. Suppose you get an education voucher for $5000 that you can only spend on university tuition. Suppose also that you would be better off if you got the $5000 in cash instead of as a voucher. The amount of cash that would leave you as well off as with the voucher is less than $5000 more than $5000 В exactly $5000 C AL

Answer 1

Answer - Given U^intial  

By, the question -

$5000 of education voucher that can only be spend on university tuition

You would be better off if u got $5000 cash instead of as a voucher  

We have to find - The amount of cash that would leave you as well as with voucher is -

With the $5000 of education voucher which only be spend on university or  $5000 cash instead of as a voucher which will make better off .So, the cash which leave us as well off with voucher is less than $5000 because in this scenario you are getting voucher as well as the cash amount which can be spend on any other thing you want.

Correct option is A which is "less than $5000".

Part b -

Given in the Question -

U(X₁, X₂) = X₁^.5 X₂^.5 ......................(1)

Income (I) = 600

Price of Good (1) P₁ = 25

Price of Good (2) P₂ = 1

New Price of Good(1) = 9

We have to find - Compensating variation

calculate 1ntial FionsT జ 1 RETETLD 5x600 25 Similamly 300 Enom This value wr tan ind The of uTiile -$4173 Daising The Expendilune fun 5 anly Companion

215 154-331(2521 M S47 21 Sicloay 328. 33 Consuaplionncniulian NOL DME-MNtM 328 3315412 549 2-328 33 218 98 Companion

Answer - The consumption variation will be "218.88"