Consider an Alberta consumer whose utility function is U (X; Y) = 3X1/3Y2/3
This consumer receives income R = $300. Prices of goods are for Px = 5, and Py = 20
Questions :
1. Deduce the demands for good X and good Y
2. If Px = 3 how does the quantity demanded of good X change?
Substitution effect in the sense of Slutsky and income effect:
has. What would be the new income if it were to change at the same time as the price of Px = 5, and Py = 20
b. What would then be his demand for good X with this new income?
c How much is the substitution effect and the income effect?