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Math Help - Micro econ question

  1. #1
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    Micro econ question

    I'm not sure if this is where I should post this question, but I didn't know where else an econ question would go ...

    Assume that your utility function for apples and bananas is given by
    U(a,b) = min{a,b}. Suppose that the price of apples increases. Illustrate the income and substitution effects both graphically and mathematically (using the Slutsky equation).

    The slutsky equation is dx1/dp1 = dx1/dp1]u=u"bar" + (dx1/dI)*(dx1/dp1)
    I believe apples and bananas are perfect complements, but I'm getting confused with the min{a,b} and how that affects the answer.

    Thanks!

    Last edited by tbl9301; September 23rd 2009 at 09:22 PM.
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  2. #2
    Ond
    Ond is offline
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    Isn't this a case of a CES utility function where goods a and b must be consumed in fixed proportions?
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