Ellsworth'sutilityfunctionisU(x,y)=min{x,y}.Ellsworthhas$150andthepriceofxandthepriceofyareboth1.Ellsworth'sbossisthinkingofsendinghimtoanothertownwherethepriceofxis1andthepriceofyis2.Thebossoffersnoraiseinpay.Ellsworth,whounderstandscompensatingandequivalentvariationperfectly,complainsbitterly.Hesaysthatalthoughhedoesn'tmindmovingforitsownsakeandthenewtownisjustaspleasantastheold,havingto moveisasbadasacutinpayof$A.Healsosayshewouldn'tmindmovingifwhenhemovedhegotaraiseof$B.WhatareAandB?
Ellsworth'sutilityfunctionisU(x,y)=min{x,y}.Ellsworthhas$150andthepriceofxandthepriceofyareboth1.Ellsworth'sbossisthinkingofsendinghimtoanothertownwherethepriceofxis1andthepriceofyis2.Thebossoffersnoraiseinpay.Ellsworth,whounderstandscompensatingandequivalentvariationperfectly,complainsbitterly.Hesaysthatalthoughhedoesn'tmindmovingforitsownsakeandthenewtownisjustaspleasantastheold,havingto moveisasbadasacutinpayof$A.Healsosayshewouldn'tmindmovingifwhenhemovedhegotaraiseof$B.WhatareAandB?
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