Two answers required. These two functions are equal to each other for goods represented by quasi-linear utility functions. For 10 points each:
[10m] Name these two functions, whose partial derivatives are related by the Slutsky equation.
ANSWER: Marshallian demand function and Hicksian demand function [accept uncompensated demand function for Marshallian demand function; accept compensated demand function for Hicksian demand function; prompt on partial answers]
[10h] Two answers required. When utility is quasi-linear, these quantities are equivalent to consumer surplus. John Hicks introduced these quantities, the change in wealth needed for an agent to reach their original utility after a price change and the change in wealth needed to reach their new utility if a price change occurred.
ANSWER: compensating variation and equivalent variation [or CV and EV; prompt on partial answers]
[10e] These constructs are “vertically parallel” to each other for quasi-linear utility functions. These curves depict bundles of goods for which a consumer does not prefer one over the other.
ANSWER: indifference curves
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