Sasha is Natasha's sister. (Their parents are not very imaginative with names.) She also consumes only concerts and films. But unlike Natasha she views them as perfect complements, and only wishes to consume them in equal numbers (i.e., in a 1-to-1 ratio). Sasha's monthly income is $100. Initially the prices of film tickets and concert tickets are PF = $5 and PC = $15. Then the price of film tickets rises to $10.
a. What is Sasha's consumption of concert and film tickets before and after the price change? Break your response into substitution and income effects. What is her compensating variation for the price change?
b. What is Sasha's uncompensated (also called "ordinary" or "Marshallian") demand function for film tickets when her income is $100 and concert tickets cost $15?
c. What is her compensated demand function for film tickets when the price of concert tickets is $15 and her utility level is the level she has before the price change? Graph it and her uncompensated demand curve from part (b) in the same graph. Why do they have the relationship they do?
d. Calculate the change in consumer surplus caused by the price change using her compensated demand curve. How does it compare to the compensating variation you calculated in part (a)? How would the change in consumer surplus you would calculate using her uncompensated demand curve compare to the compensating variation?