2. Suzie purchases two goods, food (x) and clothing (y). She has the utility function U(x, y) = xy. Now suppose that she has an income of $72 per week and that the price of clothing is Py = $1 per unit. Suppose that the price of food is initially Px = $9 and that the price subsequently increases to
Px = $12 per unit. Find the numerical values of the compensating variation and the equivalent variation due to the increase in the price of food, and graph the results.

Answer rating: 100% (QA)

nxy my M 72 Py MUX CD MU MRS we know MRS Given Px 9 X y x 4 12 18 ... View the full answer