Question: Suppose a consumer has an income of $120 per period and faces prices px = 2 and pz = 3. Her goal is to

Suppose a consumer has an income of $120 per period and faces prices px = 2 and pz = 3. Her goal is to

Suppose a consumer has an income of $120 per period and faces prices px = 2 and pz = 3. Her goal is to maximize her utility, described by the function U = 10X0.5 70.5 a. Calculate the utility-maximizing bundle (X*, Z*) b. Decompose the substitution and the income effect when px increases to $3. c. What is the own-price elasticity?

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A The consumers utility function is given by U 10X 05 Z 05 and the budget constraint is pxX pyY I Gi... View full answer

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