Consumer Alice is faced with prices (P1, ..., PN)and she has income I. Her value function...

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Question

business economics

Answer 1

Answer #1

As per implication of Multiplier ,

If parameter of constraint optimization problem rises by 1 unit, then value of optimized function rises by value of Multiplier

So here parameter is income I,

so if I rises by 1 unit, then V rises by 1*multiplier

= 1*1 = 1

so if I rises by 2, V will rise by +2

so V(p1, p2, ......., pN, I+2) = -5+2

= -3

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Answer 2

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