Assume that John’s utility function can be written as U(x,y) = quantities of two different goods. x + y, where x and y represent (a) What are the demand functions for x and y? Suppose that initially income is m=38, the price of x is px =1, and the price of y is py =4.Then px increases to 4. (b) Calculate the income and substitution effects for the price increase using the Slutsky decomposition (for both goods).\

Assume that John’s utility function can be written as U(x,y) = quantities of two different goods. x + y, where x and y represent (a) What are the demand functions for x and y? Suppose that initially income is m=38, the price of x is px =1, and the price of y is py =4.Then px increases to 4. (b) Calculate the income and substitution effects for the price increase using the Slutsky decomposition (for both goods).\

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A consumer's demand function for some good x is x=0,01m-2p, where m is income and P, is a good's price. Initially p,-20, 8000. Now assume that the price rises to p= 30 Calculate the income and substitution effects. Hint: you can use Slutsky approach, not Hicks.
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