Consider an individual making choices over two goods, x and y with initial prices px=5 and...

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Consider an individual making choices over two goods, x and y with initial prices px=5 and...

Consider an individual making choices over two goods, x and y with initial prices px=5 and py= 2, with income I= 100:

a) If the individual's preferences can be represented by the utility function u = 4x+ 2y; find the income, substitution and total effects of a decrease in the price of x to px= 3.

b) If the individual's preferences can be represented by the utility function u = min(4x,2y); find the income, substitution and total effects of a decrease in the price of x to px= 3.

c) If the individual’s preferences can be represented by the utility function u= 4xy, and the income, substitution and total effects of a decrease in the price of x to px= 4.

business economics

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