Question: 5. Teba's utility function is U = 16c2 + 46, where p is the number of calzones he eats and b is the number of

 5. Teba's utility function is U = 16c2 + 46, where

5. Teba's utility function is U = 16c2 + 46, where p is the number of calzones he eats and b is the number of beers he drinks. Teba has $120 to spend. When calzones cost $20 each and beers cost $10, Teba eats two calzones and drinks eight beers. If the price of calzones falls to $10, the own-price substitution effect of the price change would be (a) the same as the own-price income effect of the price change. (b) greater than the own-price income effect of the price change. (c) smaller than the the own-price income effect of the price change. 20 C + 10 1 = 120 10C + 10 B = M C* = 2 B* - 8 V : 16 ( 2)2 + 4(8 ) 161 4) + 32 96 B

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