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Figure 12.1 Utility maximisation subject to a budget constraint. Income,. C 2. Y 0. C / 2. U 0. Y 0 = P / 1 C 1 + C 2. 0. Y 0 /P / 1. C / 1. C 1. Figure 12.2 The income and substitution effects of a price reduction. Income,. C 2. U 0. U 1. Y 0. C // 2. b. a. C / 2. d. 0.

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  1. Figure 12.1 Utility maximisation subject to a budget constraint. Income, C2 Y0 C/2 U0 Y0 = P/1C1 + C2 0 Y0/P/1 C/1 C1

  2. Figure 12.2 The income and substitution effects of a price reduction. Income, C2 U0 U1 Y0 C//2 b a C/2 d 0 C1 C/1 C*1 C//1 Y0/P//1 Y0/P/1

  3. Figure 12.4 Compensating variation and equivalent variation. H(U0) H(U1) P/1 a f b P//1 d Y 0 C///1 C////1 C/1 C//1

  4. Figure 12.5(a) Compensating surplus . C2 U1 U0 Y0 YN b a f E e E/ 0 E// d

  5. C2 Figure 12.5(b) Equivalent surplus . YN U1 U0 Y0 h a b g f E/ d 0 E// E

  6. Figure 12.6 Environmental quality as a commodity demand function parameter P1 PC1(En) PC1(Eo) A b a PF1 H(P1, …, PN, En , U0) H(P1, …, PN, Eo , U0) 0 C/1 C1 C//1

  7. Figure 12.7 The linear trip-generating function E[Vi] E[Vi*] 0 Pi* P

  8. Figure 12.8 An illustrative surrogate demand function

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