Question: 14. (8 marks) Initially, Px = 2 and Py = 6 U=x04010.60 1=$1.000 This implies that MUx = 0.40 x-0.60 ,0.60 MUy = 0.60 x040

14. (8 marks) Initially, Px = 2 and Py = 6 U=x04010.60 1=$1.000 This implies that MUx = 0.40 x-0.60 ,0.60 MUy = 0.60 x040 y-0.40 a) (2) Find the initial U-maximizing bundle and its utility. b) (2) Let Py fall to 2. Find the resulting "final" bundle and its utility. c) (2) Find the substitution and income effects for the above price change. d) (2) Find the compensating and equivalent variations for the above change

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