x0.25 y0.75 and has an income of As in question 2a, A consumer has a utility function given by U £100, the price of good x is £5 and the price of good y is £10. Suppose the price of good y falls from £10 to £5. By how much does the demand for good y fall and how much of the resulting change in demand for good y is due to the substitution effect and how much is due to the income effect?
x0.25 y0.75 and has an income of As in question 2a, A consumer has a utility function given by U £100, the price of good x is £5 and the price of good y is £10. Suppose the price of good y falls from £10 to £5. By how much does the demand for good y fall and how much of the resulting change in demand for good y is due to the substitution effect and how much is due to the income effect?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 21SQ
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Transcribed Image Text:b) As in question 2a, A consumer has a utility function given by U = x°.25 y0.75 and has an income of
£100, the price of good x is £5 and the price of good y is £10. Suppose the price of good y falls from
£10 to £5. By how much does the demand for good y fall and how much of the resulting change in
demand for good y is due to the substitution effect and how much is due to the income effect?
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