Question: A consumer has the utility function: U(91-92) = 6491 0.5 + 92 Assume p, = I and Y =2000. Assume the price of good 1,

A consumer has the utility function: U(91-92) = 6491 0.5 + 92 Assume p, = I and Y =2000. Assume the price of good 1, P, changes from p,old = 1 to p, new =2 d. e. f. a. Find the consumer's optimal consumption bundles at the old and new price. (4) b. Calculate the Hicksian demand functions. (2) C. Decompose the movement in consumption found in part (a) into an income and substitution effect. (1) Calculate the expenditure function. (1) Find the equivalent and compensating variation. (2) What, if anything, do you learn about the change in consumer surplus resulting from the price change? (1)

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