Sam's utility function for his monthly consumption of goods X and Y is U(X,Y) = 100X -
Question:
a. What is Sam's uncompensated demand function for X, as a function of Px?
b. Suppose the price of X is initially $20, and that it rises to a price greater than $20. What is Sam's compensating variation for this price change (expressed as a function of Px)?
c. What is Sam's compensated demand function for good X, fixing the utility level he achieved at the original price of good X (Px=$20)? How does it compare to your answer in part (a)? Why?
d. Compute the change in consumer surplus for t is change to a price Px greater than $20. How does it compare to your answer in part (b)?
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