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Business, 15.10.2020 08:01 sabon

A consumer has utility function U(x, y) = min{x, y}. She has $150 and the price of x and the price of y are both 1. The consumer is thinking of accepting a job in a different town, in which the price of x is 1 and the price of y is 2. Her income would remain the same. This consumer, who understands compensating and equivalent variation perfectly, is torn. While she is keen on the prospect of a move to the new town, which boasts a fine array of cultural activities for her family, she claims that, purely on the basis of her own preferences, having to move is as bad as a cut in pay of $X. She also claims she wouldn’t mind moving if when she moved she got a raise of $Y. What are the quantities $X and $Y equal to?

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