Question: Philip's quasilinear utility function is U = 4q 1 0.5 + q 2 . His budget for these goods is Y = 10. Originally, the

Philip's quasilinear utility function is U = 4q₁^0.5 + q₂. His budget for these goods is Y = 10. Originally, the prices are p₁ = p₂ = 1. However, the price of the first good rises to p₁ = 2. Discuss the substitution, income, and total effect on the demand for q₁?

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Philips Lagrangian is L 4q 1 05 q 2 Y p 1 q 1 q 2 The first order conditions are L 1 2q 1 05 ... View full answer

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