1 Question 1 (24 points) Suppress: a consumer's utility function is given by DULY} = Xi'l'i. Also, the consmner has 360 t spend. The price of X, Px = $3. and the price of Y, Py = $4. You may nd that it helps to draw a graph to organize the information in this question. You ma draw in the blank area on the front page of the assignment, but this graph will not be yelled. a.) [2 points) How much X and Y should the consumer purchase in order to maximize their utility? b) [3 points} What is the consumer's indirect utility function? e) (3 points} What is the consumer's expenditure function? d) [2 points} How much utility does the consumer receive? e) [2 points] Now suppose Py increases to $3. What is the new.r bundle of X and Y that the consumer will demand? f) [4 points] How much money}:r would the consumer be willing to [mayr to avoid the price increase? Is this compensating variation or equivalent variation? g) [4 points) How much additional money would the consumer need in order to have the some utility level after the price change as before the price change? Is this compensating variation or equivalent variation? h) [4 points) Of the total change in the quantityr demanded of Y, how much is due to the substitution effect and how much is due to the income e'ect'? Note: since there is an increase in the price of Good Y, these values will be negative