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QUESTION
(Slutsky) Suppose original prices and income are p1 = 1; p2 = 2; I = 30. Then there is a price shock and price for good 1 increases to p1 = 3....
(Slutsky) Suppose original prices and income are p1 = 1; p2 = 2; I = 30. Then there is a price
shock and price for good 1 increases to p1 = 3. Compute TE, SE, and IE for different utility
functions. [Requirement: use Slutsky decomposition, instead of Hicks decomposition.]
(a) u(x1; x2) = x1 + x2.
(b) u(x1; x2) = min{x1; x2}.
